<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1997
REGISTRATION NO. 333-28811
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PROFFITT'S CREDIT CORPORATION
(Originator of the Trust described herein)
---------------------
<TABLE>
<S> <C> <C>
NEVADA 6189 86-0852332
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
PROFFITT'S CREDIT CORPORATION
P.O. BOX 20080
JACKSON, MISSISSIPPI 39289
(601) 968-4400
(Name, address, including zip code, and telephone number,
including area code, of Registrant's principal executive office)
BRIAN J. MARTIN, ESQ.
PROFFITT'S CREDIT CORPORATION
P.O. BOX 20080
JACKSON, MISSISSIPPI 39289
(601) 968-4400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
<TABLE>
<S> <C>
RALPH F. MACDONALD, III, ESQ. RICHARD S. FORTUNATO, ESQ.
ALSTON & BIRD LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE ATLANTIC CENTER 919 THIRD AVENUE
1201 WEST PEACHTREE STREET NEW YORK, NEW YORK 10022
ATLANTA, GEORGIA 30309-3424 (212) 735-3000
(404) 881-7000 (212) 735-2000 (FAX)
(404) 881-7777 (FAX)
</TABLE>
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Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) CERTIFICATE PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
Asset Backed Certificates,
Series 1997-2.............. $ 100% $ $
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</TABLE>
(1) Estimated solely for purposes of calculating the filing fee pursuant to Rule
457(a) under the Securities Act of 1933.
(2) This amount reflects the $303 previously paid by the Registrant on June 9,
1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED , 1997
PROFFITT'S CREDIT CARD MASTER TRUST
$ % SERIES 1997-2 CLASS A ASSET BACKED CERTIFICATES
$ % SERIES 1997-2 CLASS B ASSET BACKED CERTIFICATES
<TABLE>
<S> <C>
PROFFITT'S CREDIT CORPORATION PROFFITT'S, INC.
TRANSFEROR SERVICER
</TABLE>
---------------------
Each Class A Asset Backed Certificate (collectively, the "Class A
Certificates") and each Class B Asset Backed Certificate (the "Class B
Certificates" and together with the Class A Certificates, the "Offered
Certificates") will represent an undivided interest in the Proffitt's Credit
Card Master Trust (the "Trust") created pursuant to a master pooling and
servicing agreement (the "Pooling and Servicing Agreement") by and among
Proffitt's Credit Corporation, as transferor (in such capacity, the "Transferor"
or "PCC"), Proffitt's, Inc. as servicer (the "Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"), dated as of
, 1997. In addition, a Collateral Indebtedness Interest having an
initial principal amount of $ and Class D Certificates having an initial
principal amount of $ (each as defined herein) will be issued as part of
Series 1997-2 and will be subordinated to the Offered Certificates as described
herein. The Collateral Indebtedness Interest and the Class D Certificates are
not offered hereby. The property of the Trust includes receivables (the
"Receivables") generated from time to time in a portfolio of revolving consumer
credit card accounts (the "Accounts") originated by Proffitt's, Inc. and its
affiliates, all monies due or to become due in payment of the Receivables, and
certain other property, as more fully described herein. The Transferor is
concurrently offering and selling, and from time to time may offer and sell,
other Series that evidence undivided interests in certain assets of the Trust,
which may have terms significantly different from the Offered Certificates. The
issuance of such other Series may affect the amount or timing of payments on the
Offered Certificates. The Transferor will own the remaining undivided interest
in the Trust not represented by the Offered Certificates, the Collateral
Indebtedness Interest or the Class D Certificates or by other outstanding Series
issued by the Trust. McRae's, Inc., a wholly-owned subsidiary of the Servicer
will act as the initial subservicer (the "Subservicer") for the Receivables.
Interest will accrue on the Class A Certificates at a rate of % per
annum. Interest will accrue on the Class B Certificates at a rate of % per
annum. Interest with respect to the Offered Certificates will be distributed on
the 15th day of each month (or, if such 15th day is not a business day, the next
succeeding business day) (each, a "Distribution Date"), commencing with the
1997 Distribution Date. Principal on the Class A Certificates is
scheduled to be paid in full on the Distribution Date, but may
be paid earlier or later under certain circumstances described herein. Principal
on the Class B Certificates is scheduled to be paid in full on the
Distribution Date, but may be paid earlier or later under certain
circumstances described herein. Principal on the Class B Certificates will not
be paid until the Class A Certificates have been paid in full. See "Maturity
Assumptions."
(Continued on the following page)
SEE "RISK FACTORS" BEGINNING ON PAGE [12] OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE OFFERED CERTIFICATES. THERE IS CURRENTLY NO SECONDARY MARKET
FOR THE OFFERED CERTIFICATES, AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP.
---------------------
THE OFFERED CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN, OR RECOURSE OBLIGATIONS OF, PROFFITT'S, INC., PROFFITT'S
CREDIT CORPORATION OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT, AND
NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT TRANSFEROR(1)(2)
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<S> <C> <C> <C>
Per Class A Certificate.................. 100.00% 0. % $
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Per Class B Certificate.................. 100.00% 0. % $
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Total.................................... $ $ $
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(1) Plus accrued interest, if any, from , 1997.
(2) Before deduction of expenses estimated to be $ .
---------------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part. It is expected that the Certificates
will be delivered in book-entry form on or about , 1997, through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System, against payment therefor in immediately available funds.
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<S> <C>
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
</TABLE>
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, 1997
<PAGE> 3
(Continued from cover)
The Class B Certificates will be subordinated to the Class A Certificates
as described herein. The Collateral Indebtedness Interest and the Class D
Certificates will be subordinated to the Class A Certificates and the Class B
Certificates, as described herein. The Offered Certificates, the Collateral
Indebtedness Interest and the Class D Certificates will also be entitled to the
benefits of the funds, if any, on deposit in a Cash Collateral Account, as
described herein. See "Description of the Series 1997-2 Certificates and the
Pooling and Servicing Agreement -- Cash Collateral Account."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
CERTIFICATES, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF
SECURITIES IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND OTHER APPLICABLE LAWS AND REGULATIONS WITH RESPECT TO
ANYTHING DONE BY ANY PERSON IN RELATION TO SECURITIES IN FORM OR OTHERWISE
INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING."
---------------------
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the related Certificates, pursuant to the Pooling and Servicing
Agreement. Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. PCC is not required
and does not intend to send any of its financial reports to Certificateholders
or to the owners of beneficial interests in the Certificates ("Certificate
Owners"). The Servicer will file with the Securities and Exchange Commission
(the "Commission") with respect to the Trust the periodic reports of the
Servicer, as are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder. See "Description of the Series 1997-2 Certificates and the Pooling
and Servicing Agreement -- Book-Entry Registration," "-- Reports to
Certificateholders" and "-- Evidence as to Compliance."
AVAILABLE INFORMATION
The Transferor has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Offered Certificates. This
Prospectus, which forms a part of the Registration Statement, omits certain
information contained in such Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement (including any amendments thereof and exhibits thereto)
and any reports and other documents incorporated herein by reference as
described below under "Incorporation of Certain Documents by Reference," which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Such periodic reports, proxy statements and other information filed with the
Commission by the Servicer with respect to the Trust can also be reviewed
through the Commission's Electronic Data Gathering, Analysis and
ii
<PAGE> 4
Retrieval ("EDGAR") System which is publicly available through the Commission's
Web Site (http://www.sec.gov).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of the Offered Certificates, to whom a copy of this Prospectus
is delivered, on the written or verbal request of any such person, a copy of any
or all of the documents incorporated by reference herein (other than exhibits to
such documents). Written requests for such copies should be directed to the
Servicer, 3455 Highway 80 West, P.O. Box 20080, Jackson, Mississippi,
39289-0080. Telephone requests for such copies should be directed to (601)
968-4251.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this Prospectus may constitute
forward-looking statements. Such forward-looking statements may involve
uncertainties and other factors that may cause the actual results and
performance of Proffitt's, Inc. (together with its subsidiaries, the "Company"),
the Trust, the Accounts and the Receivables to be materially different from
future results or performance expressed or implied by such statements.
Cautionary statements regarding the risks associated with such forward-looking
statements, include, without limitation, those statements included under "Risk
Factors" and elsewhere herein or incorporated by reference herein. Among others,
factors that could adversely affect actual results and performance include local
and regional economic conditions in the areas served by the Company, the level
of consumer spending for apparel and other consumer goods, levels of consumer
debt and bankruptcies, changes in interest rates, changes in buying, charging
and payment behavior among the Company's customers, the effects of weather
conditions on seasonal sales in the Company's market areas, competition among
department and specialty stores, changes in merchandise mixes, site selection
and related traffic and demographic patterns, best practices and merchandising,
inventory management and turnover levels, realization of planned synergies and
cost savings, and the Company's ability to integrate recent and potential future
acquisitions. See "Risk Factors -- Forward-Looking Statements."
All written or verbal forward-looking statements attributable to the
Company are expressly qualified in their entirety by the cautionary statements.
iii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms which are used herein are defined elsewhere in this Prospectus. Unless the
context otherwise requires, certain capitalized terms, when used herein, only
relate to the Offered Certificates. As used herein, unless the context otherwise
requires, the "Company" means Proffitt's, Inc. and its subsidiaries, and the
terms "Proffitt's," "McRae's," "Parisian" and "Herberger's" refer to the
Company's respective department store chains that are the initial sellers of
Receivables to the Transferor (the "Department Stores"), and the existing and
predecessor entities that conduct or conducted business under such names.
References in this Prospectus to the Company's fiscal year means the fiscal year
ended on the Saturday nearest January 31 of the following calendar year (e.g.,
"fiscal 1996" means the fiscal year ended February 1, 1997). Otherwise all
references to years mean calendar years ending December 31. See "Index of Key
Terms" at the conclusion of the Prospectus.
Type of Securities......... $ aggregate principal amount of Class A
Asset Backed Certificates, Series 1997-2 (the
"Class A Certificates") and $ aggregate
principal amount of Class B Asset Backed
Certificates, Series 1997-2 (the "Class B
Certificates," and together with the Class A
Certificates, the "Offered Certificates").
Overview of the
Transaction.............. The Trust was formed for the purpose of holding the
Receivables and to provide for the issuance of the
Offered Certificates and other similar securities.
Each Offered Certificate will represent the right
to receive a portion of the collections on the
Receivables. Such portion of the collections will
be used to pay interest and principal due on such
Offered Certificate on the applicable payment date.
The Class A Certificates will also have the
benefits of excess collections of finance charges,
amounts in the Cash Collateral Account, if any, and
the subordination of the Class B Certificates, the
Collateral Indebtedness Interest and the Class D
Certificates. The Class B Certificates will also
have the benefits of excess collections of finance
charges not needed to cover shortfalls in respect
of the Class A Certificates, amounts in the Cash
Collateral Account, if any, not needed to cover
shortfalls in respect of the Class A Certificates
and the subordination of the Collateral
Indebtedness Interest and the Class D Certificates.
Trust...................... The Proffitt's Credit Card Master Trust (the
"Trust") was formed pursuant to a master pooling
and servicing agreement, dated as of ,
1997 (the "Pooling and Servicing Agreement"), by
and among Proffitt's Credit Corporation, as
transferor (in such capacity, the "Transferor" or
"PCC"), Proffitt's, Inc., as servicer (in such
capacity, the "Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (in
such capacity, the "Trustee"). The Trust, as a
master trust, is concurrently issuing one other
Series of certificates, the Series 1997-1 Variable
Funding Certificates, which will be outstanding as
of the Closing Date, and may issue additional
series (each, a "Series") from time to time, each
pursuant to a series supplement to the Pooling and
Servicing Agreement (each, a "Series Supplement" or
"Supplement"). See "Annex I" for a description of
certain terms of Series 1997-1 which is being
issued concurrently with Series 1997-2.
The Offered Certificates are part of Series 1997-2
of the Trust ("Series 1997-2"). Series 1997-2 is
part of Group One which will share Shared Excess
Finance Charge Collections and Shared Principal
Collections with other Series in Group One,
including the Series 1997-1 Variable
1
<PAGE> 6
Funding Certificates. The Offered Certificates will
be issued pursuant to the Pooling and Servicing
Agreement as supplemented by the Series 1997-2
Supplement (the "Series 1997-2 Supplement")
(hereinafter, the term "Pooling and Servicing
Agreement," unless the context requires otherwise,
refers to the Pooling and Servicing Agreement as
supplemented by the Series 1997-2 Supplement). An
interest referred to as the "Collateral
Indebtedness Interest" and deemed to be a class of
investor certificates and a class of investor
certificates referred to as the "Class D
Certificates" will also be issued as part of Series
1997-2 (the Offered Certificates, the Collateral
Indebtedness Interest and the Class D Certificates
are collectively referred to as the "Series 1997-2
Certificates" or the "Certificates"). The Class D
Certificates will be held by the Transferor and
will not be transferable without the delivery of a
tax opinion to the effect that such transfer would
not adversely affect the tax characterization of
the Trust. The Transferor may, at its option during
the Revolving Period, and subject to the
satisfaction of certain conditions set forth in the
Series 1997-2 Supplement, cause the issuance of
additional Class D Certificates. There can be no
assurance as to whether the Transferor will elect
to issue any such additional Class D Certificates.
Each certificate of a Series will represent the
right to receive (i) payments of interest at the
specified rate or rates per annum (each, a
"Certificate Rate"), and (ii) payments of principal
during or at the end of the Accumulation Period,
Rapid Amortization Period or other type of
amortization period.
As used in this Prospectus, the term
"Certificateholders" refers to registered holders
of the Offered Certificates, the term "Class A
Certificateholders" refers to holders of the Class
A Certificates, the term "Class B
Certificateholders" refers to holders of the Class
B Certificates, the term "Collateral Indebtedness
Holder" refers to the holder of the Collateral
Indebtedness Interest and the term "Class D
Certificateholders" refers to holders of the Class
D Certificates.
The assets of the Trust will be allocated among the
certificateholders of each Series and the holder of
the Exchangeable Transferor Certificate. The
interest of Series 1997-2 in the Trust means, on
any date of determination, the sum of the Class A
Investor Amount, the Class B Investor Amount, the
Collateral Indebtedness Amount and the Class D
Investor Amount (the "Investor Amount"). See
"Description of the Series 1997-2 Certificates and
the Pooling and Servicing Agreement -- General."
Sellers.................... Proffitt's, McRae's, Parisian and Herberger's, as
the initial Sellers, will be the originators of the
Receivables, together with any other affiliates of
the Company that may hereafter add to, originate,
acquire and sell receivables to the Transferor
(herein, such initial and future sellers are
referred to as the "Sellers").
Transferor................. PCC, the originator of the Trust and the Transferor
of the Receivables, is a wholly-owned (directly and
indirectly), limited purpose subsidiary of
Proffitt's, Inc.
Servicer................... Proffitt's, Inc., as Servicer, and McRae's, Inc.,
as Subservicer, will service the Receivables for
the Trust pursuant to the Pooling and
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<PAGE> 7
Servicing Agreement. The Servicer will receive a
monthly servicing fee from the Trust, from which it
will pay the Subservicer's fees.
Trust Assets............... The property of the Trust includes and will include
receivables (the "Receivables") arising under
certain consumer revolving credit card accounts
(the "Accounts") originated or acquired by the
Sellers, including any additional accounts
following their designation as such (the
"Additional Accounts") and any automatic additional
accounts (the "Automatic Additional Accounts")
following their creation, and selected by the
Transferor from the portfolio of consumer revolving
credit card accounts owned or acquired by the
Sellers, all monies due or to become due in payment
of the Receivables, all Recoveries, Collections,
all other proceeds of the Receivables and proceeds
of credit insurance policies relating to the
Receivables, all monies held in certain accounts of
the Trust (including investment earnings on such
amounts, unless otherwise specified in the Pooling
and Servicing Agreement or the related Series
Supplement), and the benefit of funds, if any, held
in the Cash Collateral Account. The Transferor is
currently designating Automatic Additional
Accounts; however, the Transferor may discontinue
the inclusion of Automatic Additional Accounts at
any time, in its sole discretion. Initially, the
Trust will not include accounts or receivables of
the Younkers Department Stores, but these may be
added at a later date, subject to the maintenance
of the outstanding ratings on rated securities
issued by the Trust.
Interest and Principal..... Each of the Offered Certificates represents an
undivided interest in the Trust, and each Offered
Certificate represents the right to payments of
interest at the specified Certificate Rate. Each
Class A Certificate represents the right to receive
payments of (i) interest at the rate of % per
annum (the "Class A Certificate Rate"), accruing
from , 1997 (the "Closing Date") and
(ii) principal scheduled to be paid in full on the
Distribution Date (the "Class A
Expected Payment Date"), but which may be paid
later or earlier, including, under certain limited
circumstances, during the rapid amortization
period, which commences at the close of business on
the day on which a Pay Out Event with respect to
Series 1997-2 is deemed to have occurred, and ends
on the first to occur of (a) the payment in full of
the Class A Investor Amount, the Class B Investor
Amount, the Collateral Indebtedness Amount and the
Class D Investor Amount, respectively, or (b) the
Stated Series Termination Date (the "Rapid
Amortization Period.")
Each Class B Certificate represents the right to
receive payments of (i) interest at the rate of
% per annum (the "Class B Certificate Rate"),
accruing from the Closing Date and (ii) principal
scheduled to be paid in full on the
Distribution Date (the "Class B Expected
Payment Date"), but which may be paid later or
earlier, including, under certain limited
circumstances, during the Rapid Amortization
Period.
The aggregate undivided interest in the Trust
represented by the Class A Certificates (the "Class
A Investor Amount") initially will equal
$ (the "Class A Initial Investor Amount")
and will decline as principal is paid to the Class
A Certificateholders or as Class A Investor Charge
Offs occur.
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<PAGE> 8
The aggregate undivided interest in the Trust
represented by the Class B Certificates (the "Class
B Investor Amount") initially will equal
$ (the "Class B Initial Investor Amount")
and will decline as collections of Principal
Receivables allocable to the Class B Certificates
are reallocated for the benefit of the Class A
Certificates, as Class A Allocable Amounts are
allocated to the Class B Certificates, or as Class
B Investor Charge Offs occur.
The final distribution of principal and interest on
the Offered Certificates will be made no later than
the Distribution Date (the "Stated
Series Termination Date"). After the Stated Series
Termination Date, the Trust will have no further
obligation to pay principal or interest on the
Offered Certificates.
The Offered Certificates will include the right to
receive varying percentages of the collections of
Finance Charge Receivables and Principal
Receivables received during each monthly period
(each, a "Monthly Period") determined in accordance
with the Pooling and Servicing Agreement. See
"Description of the Series 1997-2 Certificates and
the Pooling and Servicing Agreement -- Investor
Percentages and Transferor Percentage."
Interest payments will be funded from (i) the
portion of Finance Charge Receivables and Net
Recoveries, if any, collected during the preceding
month allocable to the Investor Amount, (ii) any
Shared Excess Finance Charge Collections allocable
to the various Investor Amounts, (iii) drawings
from the Reserve Account and the Cash Collateral
Account plus Reallocated Principal Collections and
(iv) interest, if any, earned (net of investment
expenses and losses) on the Excess Funding Account
("Available Finance Charge Collections"). The term
"Net Recoveries" means, with respect to any Monthly
Period, the excess, if any, of all amounts
(including insurance proceeds, if any) received by
the Servicer during such Monthly Period with
respect to Receivables in Defaulted Accounts
("Recoveries") over the aggregate amount of
Principal Receivables in Defaulted Accounts charged
off during such Monthly Period. Principal payments
with respect to the Certificates will be funded
from collections of Principal Receivables and in
certain circumstances, Available Finance Charge
Collections.
Denominations.............. Beneficial interests in the Offered Certificates
will be offered for purchase in denominations of
$1,000 and integral multiples thereof.
Registration of Offered
Certificates............. The Offered Certificates initially will be
represented by global Series 1997-2 Certificates
registered in the name of Cede, as the nominee of
DTC (in the United States) or the Cedel Bank
societe anonyme ("Cedel") or the Euroclear System
("Euroclear") (in Europe). Except as specified
herein, Certificate Owners of each Series offered
hereby may elect to hold their Certificates through
any of DTC (in the United States) or Cedel or
Euroclear (in Europe). Transfers within DTC, Cedel
or Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will be
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<PAGE> 9
effected by DTC through the relevant Depositaries
of Cedel or Euroclear. No purchaser of an Offered
Certificate will be entitled to receive a
definitive certificate except under certain limited
circumstances described herein. See "Description of
the Series 1997-2 Certificates and the Pooling and
Servicing Agreement -- Book-Entry Registration" and
"-- Definitive Certificates".
Record Date................ The close of business on the last business day of
the month preceding any Distribution Date shall be
the "Record Date."
Receivables................ The Receivables will consist of amounts charged by
holders of credit cards issued by the Sellers to
purchase or obtain merchandise (such amount, less
the Discount Option Receivables, the "Principal
Receivables"). The Receivables will also include
"Finance Charge Receivables," which consist of the
sum of (i) the related periodic finance charges and
any amounts charged to the Accounts in respect of
late fees, over limit fees, returned check fees or
other fees and charges (collectively, "Finance
Charges") and (ii) Discount Option Receivables. The
Transferor is initially exercising its Discount
Option. An amount equal to the product of the
Discount Percentage and the amount of the
Receivables arising in the Accounts on and after
the date such Discount Option is exercised that
otherwise would be Principal Receivables will be
treated as Finance Charge Receivables. The
aggregate amount of Receivables in the Accounts as
of , 1997 was $ , comprised of
$ of Principal Receivables (without
reduction for Discount Option Receivables),
$ of Finance Charge Receivables (without
including Discount Option Receivables) and
$ of Discount Option Receivables. The
Finance Charge Receivables will not affect the
Investor Amount or the Transferor Amount. The
aggregate undivided interest in the Principal
Receivables in the Trust evidenced by the Offered
Certificates, the Collateral Indebtedness Interest
and the Class D Certificates will never exceed the
Adjusted Investor Amount regardless of the total
amount of Principal Receivables in the Trust at any
time. The entire portfolio of the credit card
accounts originated by the initial Sellers is
referred to herein as the "Designated Portfolio."
Late charges and returned check charges are imposed
under applicable state law. Annual fees currently
are not imposed on the credit card accounts.
Under the Pooling and Servicing Agreement, the
Servicer may estimate the amount of collections
with respect to the Accounts to be allocated
between Principal Receivables and Finance Charge
Receivables. For each Monthly Period, the amount of
collections allocated to Finance Charge Receivables
for all Accounts shall be equal to the amount of
Finance Charges actually assessed on all Accounts
in the immediately preceding Monthly Period. If the
Servicer is able to determine the actual amount of
collections proceeds which are collections of
Finance Charge Receivables and collections of
Principal Receivables, the Servicer may at its
option allocate collections in accordance with such
actual amounts.
Receivables Purchase
Agreements............... Pursuant to the Receivables Purchase Agreements, as
heretofore amended (the "Receivables Purchase
Agreements"), between PCC and each of the initial
Sellers, all Receivables existing under the
Accounts at
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<PAGE> 10
the dates specified therein, and all Receivables
created thereafter until termination of the Trust
or the beginning of the Rapid Amortization Period
for all outstanding Series were sold to PCC. In
addition, from time to time, Receivables in the
related Additional Accounts and Automatic
Additional Accounts may be sold to PCC by the
Sellers. PCC, as Transferor, will in turn transfer
such Receivables to the Trust pursuant to the
Pooling and Servicing Agreement. The Transferor has
also assigned to the Trust its rights under the
Receivables Purchase Agreements. See "Description
of the Receivables Purchase Agreements."
Servicing Fee.............. Proffitt's is the Servicer of the Receivables, and
McRae's, Inc. will act as Subservicer. The Servicer
will receive a monthly fee as servicing
compensation from the Trust in an amount equal to
one-twelfth ( 1/12th) of the product of 2% per
annum and the Adjusted Investor Amount (the
"Investor Monthly Servicing Fee"), from which it
will pay the Subservicer for its servicing
activities. See "Description of the Series 1997-2
Certificates and the Pooling and Servicing
Agreement -- Servicing Compensation and Payment of
Expenses."
Interest Payments.......... Interest on the Class A Certificates will be
distributed on each Distribution Date in an amount
equal to the product of one-twelfth ( 1/12th) of
the Class A Certificate Rate and the principal
amount of the Class A Certificates as of the
preceding Record Date; provided, however, that in
the case of the first Distribution Date, the amount
of interest payable on the Class A Certificates
will be $ .
Interest on the Class B Certificates will be
distributed on each Distribution Date in an amount
equal to the product of one-twelfth ( 1/12th) of
the Class B Certificate Rate and the principal
amount of the Class B Certificates as of the
preceding Record Date; provided, however, that in
the case of the first Distribution Date, the amount
of interest payable on the Class B Certificate will
be $ .
Interest on the Offered Certificates will be
calculated on the basis of a 360-day year
consisting of twelve 30-day months. Interest on the
Class A Certificates or the Class B Certificates
for any Distribution Date due but not paid on such
Distribution Date will be payable on the next
succeeding Distribution Date, together with
additional interest on such amount at the Class A
Certificate Rate or the Class B Certificate Rate,
as applicable, plus 2% per annum.
Revolving Period and
Accumulation Period...... The revolving period with respect to the Offered
Certificates (the "Revolving Period") is scheduled
to end (although such period may end sooner upon
the occurrence of a Pay Out Event) and the
accumulation period with respect to the Offered
Certificates (the "Accumulation Period") is
scheduled to commence at the close of business on
the last day of the Monthly
Period. Subject to the conditions set forth under
"Description of the Series 1997-2 Certificates and
Pooling and Servicing Agreement -- Postponement of
Accumulation Period" herein, the day on which the
Revolving Period is scheduled to end and the
Accumulation Period commences may be delayed to no
later than the close of business on the last day of
the Monthly Period. Unless a
Pay Out Event has occurred, (i) the
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<PAGE> 11
"Class A Accumulation Period" will commence at the
close of business on the last day of the Revolving
Period and end on the earliest of (a) the
commencement of the Rapid Amortization Period, (b)
the payment in full to the Class A
Certificateholders of the Class A Investor Amount
or (c) the Stated Series Termination Date, and (ii)
the "Class B Accumulation Period" will commence on
the Distribution Date on which the Class A Investor
Amount is paid in full or, if the Class A Investor
Amount is paid in full on the Class A Expected
Payment Date, at the close of business on the Class
A Expected Payment Date, and end on the earliest of
(a) the commencement of the Rapid Amortization
Period, (b) the payment in full to the Class B
Certificateholders of the Class B Investor Amount
or (c) the Stated Series Termination Date.
Principal Payments......... No principal will be payable to the Class A
Certificateholders until the Class A Expected
Payment Date or, upon the occurrence of a Pay Out
Event, the first Distribution Date with respect to
the Rapid Amortization Period. No principal will be
payable to the Class B Certificateholders until the
Class B Expected Payment Date or, upon the
occurrence of a Pay Out Event, until the Class A
Investor Amount is paid in full (the "Class B
Principal Commencement Date"). No principal will be
payable to the Class B Certificateholders until the
Class A Certificates have been paid in full. For
the period beginning on the Closing Date and ending
with the commencement of the Accumulation Period or
the Rapid Amortization Period, collections of
Principal Receivables otherwise allocable to the
Certificateholders (other than any portion of such
collections applied as Reallocated Principal
Collections) will, subject to certain limitations,
be treated as Shared Principal Collections and
applied to cover principal payments due to or for
the benefit of certificateholders of other Series,
if so specified in the Series Supplement for such
other Series, be deposited in the Excess Funding
Account, be paid to the Transferor as holder of the
Exchangeable Transferor Certificate, or, in certain
limited circumstances, be paid to the Collateral
Indebtedness Holder or the Class D
Certificateholders. See "Description of the Series
1997-2 Certificates and the Pooling and Servicing
Agreement -- Pay Out Events" for a discussion of
the events which might lead to the termination of
the Revolving Period prior to the scheduled
commencement of the Accumulation Period.
Right to Adjust Principal
Receivables Allocation
Formula.................. During the Accumulation Period, the Investor
Percentage of Principal Receivables may be reset in
connection with the issuance of a new Series at the
option of the Transferor (and any such reset
Investor Percentage will apply in any Rapid
Amortization Period following the Accumulation
Period) to a fixed percentage, subject to certain
minimum and maximum amounts. The Investor
Percentage with respect to the allocation of
Principal Receivables during the Rapid Amortization
Period will remain fixed at the then existing
Investor Percentage and may not be reset.
Adjustments to this percentage may result in lower
allocations of principal to the Offered
Certificates than would have occurred in the
absence of an exercise of the reset option. Such a
reduction in the allocation of principal would
benefit other Series and could delay payment of
principal to the Certificateholders if the amount
of collections of Principal Receivables is reduced.
See "Description of the Series 1997-2 Certificates
and the Pooling and Servicing Agreement."
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<PAGE> 12
Subordination of the Class
B Certificates, the
Collateral Indebtedness
Interest and the Class D
Certificates............. The Class B Certificates, the Collateral
Indebtedness Interest and the Class D Certificates
will be subordinated as described herein to the
extent necessary to fund certain payments with
respect to the Class A Certificates. In addition,
the Collateral Indebtedness Interest and the Class
D Certificates will be subordinated as described
herein to the extent necessary to fund certain
payments with respect to the Class B Certificates.
If the amount held in the Cash Collateral Account
is zero and the Collateral Indebtedness Amount and
the Class D Investor Amount are reduced to zero,
the Class B Certificateholders will bear directly
the credit and other risks associated with their
undivided interest in the Trust, including losses
that would otherwise be borne by the Class A
Certificateholders. In addition, if the Class B
Investor Amount is reduced to zero, the Class A
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. To the extent the Class B
Investor Amount or the Class A Investor Amount is
reduced, the percentage of collections of Finance
Charge Receivables allocable to the Class B
Certificateholders and the Class A
Certificateholders, respectively, with respect to
subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such
reduction in the Class B Investor Amount or the
Class A Investor Amount is not reimbursed, the
amount of principal distributable to the Class B
Certificateholders and the Class A
Certificateholders, respectively, will be reduced.
See "Description of the Series 1997-2 Certificates
and the Pooling and Servicing Agreement -- Investor
Percentages and Transferor Percentage" and
"-- Subordination of the Class B Certificates, the
Collateral Indebtedness Interest and the Class D
Certificates."
Exchangeable Transferor
Certificate.............. PCC (or one or more of its affiliates) will hold
the undivided interest in the assets of the Trust
not represented by the Series 1997-2 Certificates
or certificates of any other Series. The amount of
such interest (the "Transferor Amount") will equal
the aggregate amount of Principal Receivables plus
the amount held in the Excess Funding Account minus
the aggregate investor amount for all Series and
minus the investor amount of any interest in the
Trust issued to an Enhancement Provider (without
duplication). The Transferor Amount will fluctuate
as the aggregate amount of Principal Receivables
changes, as the amount in the Excess Funding
Account changes, as Receivables from Additional
Accounts and Automatic Additional Accounts and
Receivables from Removed Accounts are added to and
removed from the Trust and as other Series are
issued and as outstanding Series amortize. Such
interest will be evidenced by one or more
certificates (individually and collectively, the
"Exchangeable Transferor Certificate"). The
Transferor, from time to time, may create other
Series of certificates. However, at all times the
Exchangeable Transferor Certificate must represent
an interest in the Trust at least equal to the
Minimum Transferor Amount. The ability of the
Transferor to reduce the Minimum Transferor Amount
is subject to certain additional conditions,
including the delivery of an opinion of counsel
that such reduction will not have a material
adverse effect on the federal income tax
characterization of any outstanding
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<PAGE> 13
Series and written confirmation from each Rating
Agency that such reduction will not result in such
Rating Agency reducing or withdrawing its rating on
any rated certificates then outstanding under any
Series. See "The Accounts."
Amounts Available as
Enhancement.............. On each Distribution Date, the amount of
enhancement available to the Certificateholders
will equal the lesser of (i) the sum of the
Collateral Indebtedness Amount, the Class D
Investor Amount and the amount, if any, on deposit
in the Cash Collateral Account (collectively, the
"Available Enhancement Amount") and (ii) the
Required Enhancement Amount. The "Required
Enhancement Amount" means, with respect to any
Distribution Date, subject to certain limitations
more fully described herein, the product of the
Adjusted Investor Amount and %, but not less
than $ ; provided, however, that if a Pay
Out Event occurs, then the Required Enhancement
Amount shall equal the Required Enhancement Amount
on the Distribution Date immediately preceding the
occurrence of such Pay Out Event. If on any
Distribution Date, the Available Enhancement Amount
(after giving effect to any issuance of additional
Class D Certificates on such Distribution Date,
which issuance will be at the sole option of the
Transferor and subject to the satisfaction of
certain conditions) is less than the Required
Enhancement Amount, certain Excess Spread and
Shared Excess Finance Charge Collections allocable
to Series 1997-2, to the extent available, will be
used to increase the Available Enhancement Amount
to the extent of such shortfall. If on any
Distribution Date the Available Enhancement Amount
exceeds the Required Enhancement Amount, such
excess may be applied to reduce the Available Cash
Collateral Amount or the Collateral Indebtedness
Amount in accordance with the Loan Agreement and,
accordingly, if so applied, would not be available
to the Certificateholders. The Required Enhancement
Amount may be reduced upon receipt of notice from
the Rating Agencies rating the Offered Certificates
that a reduction of the Required Enhancement Amount
will not result in the reduction of the rating of
the Offered Certificates.
Cash Collateral Account.... A Cash Collateral Account (the "Cash Collateral
Account") will be held in the name of the Trustee
for the benefit of the Certificateholders, the
Collateral Indebtedness Holder and the Class D
Certificateholders. The balance of the Cash
Collateral Account (the "Available Cash Collateral
Amount") initially will be zero and will increase
thereafter, subject to the availability of Excess
Spread and Shared Excess Finance Charge collections
allocable to Series 1997-2, and to the extent
amounts are required to be deposited therein
pursuant to the Loan Agreement. Withdrawals may be
made from the Cash Collateral Account to fund such
amounts as described under "Description of the
Series 1997-2 Certificates and the Pooling and
Servicing Agreement -- Cash Collateral Account."
Collections................ During any Monthly Period in the Revolving Period,
the Servicer will deposit all collections of
Finance Charge Receivables allocable to the Series
1997-2 Certificates in an account established for
such purpose (the "Collection Account"), on a daily
basis, subject to certain exceptions, but only to
the extent of the amount of interest due on the
Offered
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<PAGE> 14
Certificates on the related Distribution Date,
plus, if Proffitt's, Inc. is no longer the
Servicer, the amount of the Investor Monthly
Servicing Fee for such related Distribution Date.
During any Monthly Period in the Revolving Period,
the Servicer will generally pay to the holder of
the Exchangeable Transferor Certificate collections
in respect of Principal Receivables, less any
amounts applied to reduce the Collateral
Indebtedness Amount, any applied Reallocated
Principal Collections and amounts required to be
deposited in the Excess Funding Account. During the
Accumulation Period or the Rapid Amortization
Period, the Servicer will deposit all collections
of Principal Receivables allocable to the Series
1997-2 Certificates in the Collection Account on a
daily basis, subject to certain exceptions. See
"Description of the Series 1997-2 Certificates and
the Pooling and Servicing Agreement -- Applications
of Collections."
Optional Repurchase........ The Class A Certificates and the Class B
Certificates will be subject to optional repurchase
by the Transferor on any Distribution Date after
the Adjusted Investor Amount is reduced to an
amount less than or equal to 10% of the Initial
Investor Amount, if certain conditions set forth in
the Pooling and Servicing Agreement are met. The
repurchase price of the Offered Certificates will
be equal to the Adjusted Investor Amount thereof
plus accrued and unpaid interest thereon. "Initial
Investor Amount" means the aggregate initial
principal amount of the Series 1997-2 Certificates,
which is $ . See "Description of the
Series 1997-2 Certificates and the Pooling and
Servicing Agreement -- Optional Repurchase; Final
Payment of Principal; Termination."
ERISA Considerations....... If the Trust's assets were deemed to be "plan
assets" of an investor that is a Benefit Plan, it
is uncertain whether existing exemptions from the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code of 1986,
as amended (the "Code") would apply to all
transactions involving the Trust's assets.
Accordingly, if the Offered Certificates are
acquired by Benefit Plan investors, such
acquisition could result in excise taxes and other
liabilities under ERISA and the Code. Plan
fiduciaries must carefully determine whether the
acquisition and holding of the Offered Certificates
and the operation of the Trust would result in such
excise taxes and other liabilities to their Benefit
Plan. See "ERISA Considerations."
Class A Certificate
Rating................... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
rating category by at least two nationally
recognized Rating Agencies. The rating of the Class
A Certificates is based primarily on the value of
the Receivables as determined by the applicable
Rating Agency and the terms of the Class B
Certificates, the Collateral Indebtedness Interest
and the Class D Certificates. See "-- Subordination
of the Class B Certificates, the Collateral
Indebtedness Interest and the Class D Certificates"
and "Risk Factors -- Limited Nature of Certificate
Rating."
Class B Certificate
Rating................... It is a condition to the issuance of the Class B
Certificates that they be rated in one of the three
highest rating categories by at least two
nationally recognized Rating Agencies. The rating
of the Class B Certificates is based primarily on
the value of the Receivables as determined by the
applicable Rating Agency and the terms of the
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<PAGE> 15
Collateral Indebtedness Interest and the Class D
Certificates. See "-- Subordination of the Class B
Certificates, the Collateral Indebtedness Interest
and the Class D Certificates" and "Risk
Factors -- Limited Nature of Certificate Rating."
Risk Factors............... See "Risk Factors" beginning on page [12] of this
Prospectus for a discussion of certain factors that
should be considered by prospective purchasers of
the Offered Certificates.
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<PAGE> 16
RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Offered Certificates, and there is no
assurance that one will develop. The Underwriters expect, but are not obligated,
to make a market in the Offered Certificates. There is no assurance that any
such market will develop or, if it does develop, that it will provide liquidity
of investment or continue.
LIMITED CREDIT ENHANCEMENT
Credit enhancement will be provided by subordination of the Collateral
Indebtedness Interest and the Class D Certificates and additionally, in the case
of the Class A Certificates, by subordination of the Class B Certificates.
Amounts, if any, deposited in the Cash Collateral Account will also provide
limited credit enhancement. Certificateholders will have no recourse with
respect to credit losses on Receivables against the Sellers, the Transferor, the
Servicer, the Subservicer, the Trustee or any of their affiliates. Consequently,
if the available credit enhancement is reduced to zero, the Certificateholders
will bear directly the credit and other risks associated with their undivided
interests in the Trust. Certificateholders must rely solely upon payments on the
Receivables for the payment of principal of, and interest on, the Offered
Certificates. Should the Offered Certificates not be paid in full on a timely
basis, Certificateholders may not look to any assets of the Sellers, the
Transferor, the Servicer, the Subservicer, the Trustee or any affiliate thereof
to satisfy any payment obligations with respect to the Certificates.
TRANSFER OF RECEIVABLES
The Transferor has represented and warranted in the Pooling and Servicing
Agreement that the transfer of the Receivables to the Trust is either a valid
transfer and assignment of the Receivables to the Trust or the grant to the
Trust of a security interest in the Receivables and the Sellers have represented
in the Receivables Purchase Agreements that the transfer of the Receivables to
the Transferor is a valid sale of the Receivables. The Sellers and the
Transferor have taken and will take all actions as are required under applicable
law to perfect the Transferor's and the Trust's interest in the Receivables. The
Transferor has represented and warranted that if the transfer of the Receivables
by the Transferor to the Trust is the grant to the Trust of a security interest
in the Receivables, such security interest constitutes a first priority
perfected security interest therein and, to the extent provided under the
applicable Uniform Commercial Code (the "UCC"), in the proceeds thereof (except
for liens for local taxes and government charges not due and payable or being
contested in good faith by the Transferor). The Sellers have similarly
represented and warranted that the Transferor's interest in the Receivables
constitutes a first priority perfected ownership interest in the Receivables and
the proceeds thereof (except for liens for local taxes and governmental charges
not due and payable or being contested in good faith by the applicable Seller).
Nevertheless, a tax or government lien on property of a Seller or the Transferor
arising before any Receivable comes into existence may have priority over the
Transferor's or the Trust's interest in such Receivable. See "Certain Legal
Aspects of the Receivables -- Transfer of Receivables."
COMMINGLING OF COLLECTIONS
While Proffitt's, Inc. and McRae's, Inc. are the Servicer and Subservicer,
respectively, collections held by or on behalf of the Servicer may, during
periods when certain conditions specified in the Pooling and Servicing Agreement
are satisfied, be commingled and used for the Servicer's own benefit prior to
each Distribution Date and, in the event of the insolvency or receivership of
any of the Sellers, the Servicer, the Subservicer or the Transferor or, in
certain circumstances, the lapse of certain time periods as provided under the
UCC, the Trust may not have a perfected interest in such collections. During
periods when the Company fails to maintain the rating or meet other criteria
required by the applicable Rating Agency, the Servicer will be required to
deposit a portion of the collections directly into the Collection Account no
later than the second business day after the date of processing of such
collections.
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<PAGE> 17
BANKRUPTCY RISKS
Each of the Sellers warrants in the applicable Receivables Purchase
Agreement that the sale of Receivables to be sold by them to the Transferor is a
valid sale of such Receivables to the Transferor, and the Transferor warrants in
the Pooling and Servicing Agreement that the transfer of the Receivables by it
to the Trust is either a valid transfer of the Receivables or the grant of a
security interest in the Receivables to the Trust. Each of the Sellers and the
Transferor has agreed to take such actions as are required to perfect the sale
of Receivables to the Transferor and to perfect the Trust's interest in the
Receivables. Each of the Sellers intends that each transfer of Receivables by
them to the Transferor constitutes a "true sale" of such Receivables to the
Transferor. If such transfer constitutes a "true sale", such Receivables and the
proceeds thereof would not be part of the Seller's bankruptcy estate under
Section 541 of the U.S. Bankruptcy Code (Title 11, United States Code), as
amended (the "Bankruptcy Code"). If any Seller should become a debtor subject to
a Bankruptcy Code proceeding subsequent to such transfer, the Receivables and
related proceeds should not be available to creditors of such Seller.
Notwithstanding the foregoing, if a Seller were to become a debtor in a
bankruptcy case and a creditor or a trustee-in-bankruptcy of such debtor or such
debtor itself, as debtor-in-possession, were to take the position that the sale
of Receivables by such Seller to the Transferor should be recharacterized as a
pledge of such Receivables to secure a borrowing of such debtor, then delays in
payments of collections of Receivables to the Transferor and consequently to the
Trust and delays in payments on the Offered Certificates could occur. If the
court were to rule in favor of such recharacterization then reductions in the
amount of such payments could occur and Certificateholders could experience
losses in their investment in the Offered Certificates. See "Certain Legal
Aspects of the Receivables -- Certain Matters Relating to Bankruptcy or
Insolvency."
The Transferor has taken steps in structuring the transactions contemplated
hereby that are intended to reduce the risk that a bankruptcy case with respect
to the Company or any Seller will result in consolidation of the assets and
liabilities of the Company or any Seller with those of the Transferor. The
Transferor has also been organized in a manner intended to reduce the risk that
it will become subject to a bankruptcy case. If, notwithstanding the foregoing,
(i) a court concluded that the assets and liabilities of the Transferor should
be consolidated with the assets and liabilities of the Company or any Seller;
(ii) the Transferor became a debtor in a bankruptcy proceeding, or (iii) a
creditor or a trustee-in-bankruptcy of such debtor itself, as debtor-in-
possession, were to litigate the consolidation issue, then delays in
distributions in respect of the Offered Certificates and possible reductions in
the amounts of such distributions could occur. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Bankruptcy or Insolvency."
If the Company or an individual Seller or the Transferor were to become a
debtor in a bankruptcy case or certain other events relating to the insolvency
of the Company or an individual Seller or the Transferor were to occur, causing
a Pay Out Event pursuant to the Pooling and Servicing Agreement, new Principal
Receivables would not be transferred to the Trust. If any such events occur with
respect to the Transferor, the Trustee would sell the Receivables (unless
holders of more than 50% of the principal amount of outstanding certificates of
each class under each Series instruct otherwise), thereby causing a termination
of the Trust and a loss to the Certificateholders if the net proceeds from such
sale were insufficient to pay the Certificateholders in full. If no Servicer
Default other than such insolvency event exists, the debtor-in-possession may
have the power to prevent either the Trustee or the Certificateholders from
appointing a successor Servicer. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Bankruptcy or Insolvency."
Payments made by each of the Sellers pursuant to the Receivables Purchase
Agreements in respect of repurchases of Ineligible Receivables or in respect of
Adjustments may be recoverable by such Sellers, as applicable, as
debtor-in-possession or by a trustee-in-bankruptcy of an individual Seller, as
applicable, from the Transferor or the Certificateholders as a preferential
transfer, if such payments were made within one year prior to the commencement
of a bankruptcy case in respect of the Seller, as applicable.
Under federal law, under certain circumstances, a tax, government or other
nonconsensual lien arising prior to the creation of a Receivable could have
priority over the Trust's interest in such Receivable. Under the Receivables
Purchase Agreements, each of the Sellers will warrant to the Transferor, and
under the Pooling and Servicing Agreement, the Transferor will warrant to the
Trust, that such party has conveyed the
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<PAGE> 18
Receivables free and clear of any lien of any third party, except for liens for
local taxes and governmental charges not due and payable or being contested in
good faith by the applicable Seller or the Transferor, as applicable. Each of
the Transferor and each of the Sellers will also covenant not to sell, pledge,
assign, transfer or grant any lien on any Receivable included in the Trust other
than to the Trust.
EFFECT OF CONSUMER AND DEBTOR PROTECTION LAWS ON COLLECTIBILITY OF RECEIVABLES
The Accounts and the Receivables are subject to numerous federal and state
consumer protection laws which impose requirements on the making and collection
of consumer credit. Such laws, as well as any new laws or rulings which may be
adopted, may adversely affect the Servicer's ability to collect the Receivables
or any of the Department Stores' ability to maintain or improve historic levels
of finance charges and other fees.
During recent years, consumer awareness has increased with respect to the
level of finance charges and fees and other practices of credit card issuers and
other consumer revolving credit loan providers which could result in public
pressure on federal and state legislators to impose limitations on finance
charges or other fees. If federal or state laws imposing a ceiling on finance
charge rates were enacted and were applicable to the Sellers, each of the
Department Stores could be required to lower the finance charges that it
assesses on the Receivables to a level which might result in a Pay Out Event,
thus causing commencement of the Rapid Amortization Period and other adverse
consequences to Certificateholders.
Pursuant to the Pooling and Servicing Agreement, the Transferor agrees to
accept retransfer from the Trust, and pursuant to the Receivables Purchase
Agreements, each of the Sellers agrees to repurchase from the Transferor, each
Receivable that did not comply with all requirements of law at the time it was
transferred to the Trust. Pursuant to such agreements, the Transferor makes to
the Trust, and each of the Sellers makes to the Transferor, certain other
representations and warranties relating to the validity and enforceability of
the Receivables. However, it is not anticipated that the Trustee will make any
examination of the Receivables or the records relating thereto for the purpose
of establishing the presence or absence of defects or compliance with such
representations and warranties, or for any other purpose. The sole remedy if any
such representation and warranty is breached, and such breach continues beyond
the applicable cure period, is that the Transferor will be obligated to accept
the retransfer of such Receivables and, as applicable, each of the Sellers will
be obligated to repurchase such Receivables from the Transferor. See
"Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Representations and Warranties," and "Certain Legal Aspects of the
Receivables -- Consumer and Debtor Protection Laws, Proposed Legislation and
Recent Litigation."
Application of federal and state bankruptcy and debtor relief laws could
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being charged off as uncollectible. See "Description
of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Allocation of Investor Default Amount; Adjustment Amounts; Investor
Charge Offs."
EFFECT OF PAYMENT RATE ON CERTIFICATES
The Receivables may be paid at any time and there is no assurance that
there will be additional Receivables or that any particular pattern of the
Department Stores' credit card account repayments will occur. A significant
decline in the amount of Receivables generated could result in the occurrence of
a Pay Out Event and the commencement of the Rapid Amortization Period, and a
significant decrease in the Department Stores' credit card account monthly
payment rates could result in the Offered Certificates being paid later than the
Class A Expected Payment Date or the Class B Expected Payment Date, as
applicable, or could slow the return of principal during the Rapid Amortization
Period. See "Maturity Assumptions" and "-- Ability to Change Terms of the
Receivables" for a discussion of the Company's ability to change the terms,
including interest rate and fees, on the Accounts.
EFFECT OF CONVENIENCE USE ON CERTIFICATES
Certain of the Department Stores do not impose finance charges on purchases
made by their respective credit card accounts if the obligor pays a specified
percentage of his or her entire amount due within a
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specified period. Also, each of the Department Stores from time to time offers
deferred billing on certain purchases. No interest is charged on such a deferred
Receivable for up to 90 days. An increase in the "convenience use" of the
Sellers' credit card accounts or in the level of deferred billing Receivables
could have adverse effects upon the Certificateholders. See "Credit Card
Program -- Billing and Payments."
ABILITY TO CHANGE TERMS OF THE RECEIVABLES
The Sellers may, after consultation with and approval by the Company's
senior merchandising and finance executives, change the annual percentage rate
of interest and other Finance Charges which will be applicable from time to time
to the Accounts of the Department Stores, alter the minimum monthly payments
required on the Accounts and change any other terms with respect to the
Accounts. A decrease in the annual percentage rate and/or in the other Finance
Charges would decrease the effective yield on the Accounts and could result in
the occurrence of a Pay Out Event and the commencement of the Rapid Amortization
Period. Each of the Sellers has agreed that, except as otherwise required by law
or as is deemed advisable by each of the Sellers, respectively, for their
respective Department Store credit card program based upon a good faith
assessment by them, in their sole discretion, of the various factors affecting
the use of their respective credit card accounts, they will not reduce the
annual percentage rate used to assess the Finance Charges on the Receivables or
other fees on the Accounts if, as a result of such reduction, their reasonable
expectation of the Portfolio Yield after giving effect to such reduction would
be less than the weighted average base rates of all outstanding Series. In
addition, each of the Sellers has agreed that, unless required by law, they will
not reduce such annual percentage rate if their reasonable expectation of the
Portfolio Yield after giving effect to such reduction would be less than the
highest certificate rate for any outstanding Series. Each of the Sellers may
from time to time elect to change the terms applicable to certain segments of
their respective Department Store credit card accounts, based upon its
determination of credit risk or other considerations. In servicing the Accounts,
the Servicer is required to exercise the same care and apply the same policies
that it exercises in handling similar matters for its own comparable accounts.
Except as specified above, there are no restrictions on any Seller's ability to
change the terms of the Accounts or the respective Seller's credit card
guidelines (the "Credit Card Guidelines"), including policies on credit
approval. There can be no assurance that changes in applicable law, changes in
the marketplace or prudent business practice might not result in a determination
by each of the Sellers to take actions which would change Account terms. See
"Credit Card Program" and "Description of the Series 1997-2 Certificates and the
Pooling and Servicing Agreement -- Pay Out Events."
DEPENDENCE ON THE COMPANY'S DEPARTMENT STORES; COMPETITION
Because the credit card Accounts currently included in the Trust can be
used for purchases of merchandise and services only from the respective
Department Stores that issued such Accounts, the Trust is completely dependent
upon sales made by the Sellers. The retailing business is highly competitive,
and the Department Stores compete with other stores operating in the geographic
areas in which they operate as well as numerous other types of retail outlets.
Each of the Department Stores has several major competitors in each of its
markets. The Company's Department Stores also compete with national and regional
department stores, specialty apparel stores and discount store chains, some of
which are larger than the Company and may be able to devote greater financial
and other resources to marketing and other competitive activities. The Company
also competes with local stores that carry similar or alternative categories of
merchandise. The Company generally competes on the basis of pricing, quality,
merchandise selection, customer service and amenities and store design. The
Company's success also depends in part on its ability to anticipate and respond
to changing merchandise trends and customer preferences in a timely manner.
Accordingly, any failure by the Company to anticipate and respond to changing
merchandise trends and customer preferences could materially adversely affect
sales of the Company's private brands and product lines, which in turn could
materially adversely affect the Company's business, financial condition or
results of operations. There can be no assurance that the Company's stores will
continue to compete successfully with such other stores or that any such
competition will not have a material impact on the Company's financial condition
or results of operations. In addition, the Pooling and Servicing Agreement does
not prohibit the respective stores from disposing of all or any portion of its
business or assets. See "Credit Card Program."
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<PAGE> 20
There can be no assurance that the Department Stores will continue to
generate Receivables at the same rate as in prior years. In the event the
Department Stores do not generate an adequate level of Receivables, a Payout
Event will occur. The occurrence of a Pay Out Event will result in the
commencement of the Rapid Amortization Period. During the Rapid Amortization
Period, collections of Principal Receivables allocated to the Investor Amount
will be applied to reduce the Class A Investor Amount and after such amount has
been reduced to zero, to reduce the Class B Investor Amount. The Class A
Investor Amount and the Class B Investor Amount may be reduced to zero prior to,
or on or after the respective Class A Expected Payment Date and Class B Expected
Payment Date. The reduction of the Class A Investor Amount and the Class B
Investor Amount prior to the Class A Expected Payment Date or the Class B
Expected Payment Date, as the case may be, means that a holder will not receive
the benefit of the Certificate Rate for the period of time originally expected
on the amount of such reduction. There can be no assurance that the holder will
be able to reinvest the proceeds at a similar rate of return and at a similar
risk level. An early repayment could benefit a holder who acquired a Class A
Certificate or Class B Certificate at a discount and harm a holder who acquired
a Class A Certificate or Class B Certificate at a premium.
COMPETITION FROM OTHER CREDIT AND PAYMENT SOURCES
The Department Stores accept other credit cards in addition to their
respective proprietary credit cards, including American Express(R),
MasterCard(R), VISA(R) and the Discover Card(R). Therefore, not all sales on
credit by the Department Stores will generate Receivables. The credit card
market is highly competitive and has experienced increased advertising, target
marketing and pricing competition as traditional and new credit card issuers
have sought to enter the market or expand. The use of incentive programs, (e.g.
awards for card usage) may also affect the volumes charged on various credit
cards. There can be no assurance that customer purchases using Department Store
credit card accounts in the future will continue to represent their current
percentage of each Department Store's sales, compared to sales made on other
credit cards, debit cards, and by cash or check. See "Credit Card
Program -- Portfolio Information."
SOCIAL, LEGAL AND ECONOMIC FACTORS
Changes in credit use and payment patterns by credit card account holders
may also result from a variety of social, legal and economic factors. Economic
factors, nationally and in the regions served by the Sellers including
inflation, prevailing interest rates and unemployment levels, may also be
reflected in increased defaults by the Department Stores' credit card holders
and in the generation of new Receivables. Changes in tax laws, laws regulating
permissible Finance Charges and the Bankruptcy Code could also affect the use
and terms of, and collections on, credit cards. The Transferor is unable to
determine and has no basis to predict whether, or to what extent, social, legal
or economic factors will affect future credit card account use or repayment
patterns. An increase in defaults may result in Class B Investor Charge Offs or
Class A Investor Charge Offs, which will directly reduce the Class B Investor
Amount and the Class A Investor Amount, respectively. In addition, slower
repayments of principal and interest by cardholders due to a higher annual
percentage rate applicable to the Accounts could result in the Offered
Certificates not being paid in full by the Class A Expected Payment Date and the
Class B Expected Payment Date, respectively. A reduction in the annual
percentage rate applicable to the Accounts may result in a decline in the
Portfolio Yield, which could result in a Pay Out Event. See "Maturity
Assumptions" and "Description of the Series 1997-2 Certificates and the Pooling
and Servicing Agreement -- Pay Out Events."
LIMITED NATURE OF CERTIFICATE RATING
It is a condition to issuance of the Class A Certificates that they be
rated in the highest rating category by at least two Rating Agencies. It is a
condition to issuance of the Class B Certificates that they be rated in one of
the three highest rating categories by at least two Rating Agencies. The ratings
address the likelihood of full payment of principal and interest of the Offered
Certificates, in the case of principal, by the Stated Series Termination Date,
and in the case of interest, on the applicable interest payment dates. These
ratings will be based primarily on the value of the Receivables, the credit
support provided by the subordination of the Collateral Indebtedness Interest
and the Class D Certificates and, in the case of the Class A Certificates, by
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<PAGE> 21
the subordination of the Class B Certificates. These ratings do not address the
possibility of a Pay Out Event or the likelihood that the Class A Certificates
will be paid on the Class A Expected Payment Date or that the Class B
Certificates will be paid on the Class B Expected Payment Date. These ratings
are not recommendations to purchase, hold or sell the Offered Certificates,
inasmuch as such ratings do not comment as to the market price of the Offered
Certificates or their suitability for a particular investor. There is no
assurance that either rating will remain for any given period of time or that
either rating will not be lowered or withdrawn by the applicable Rating Agency,
if, in its judgment, circumstances so warrant.
There can be no assurance as to whether any nationally recognized
statistical rating agency not requested to rate the Offered Certificates will
nonetheless issue a rating with respect to either class of the Offered
Certificates, and if so, what such rating may be. A rating assigned to either
Class A Certificates or Class B Certificates by such a rating agency that has
not been requested by the Transferor to do so may be lower than the ratings
assigned by the Rating Agencies pursuant to the Transferor's request.
BOOK-ENTRY REGISTRATION
The Offered Certificates will initially be represented by certificates
registered in the name of Cede and will not be registered in the names of the
persons acquiring a beneficial interest in the Offered Certificates (the
"Certificate Owners") or their nominees. Unless and until Definitive
Certificates are issued, Certificate Owners will therefore not be recognized by
the Trustee as Certificateholders, as that term is used in the Pooling and
Servicing Agreement. Until such time, Certificate Owners will accordingly only
be able to receive payments to, and exercise the rights of, Certificateholders
indirectly through DTC and its participating organizations ("Participants"), and
will receive reports and other information provided for under the Pooling and
Servicing Agreement only in accordance with the rules, regulations and
procedures creating and affecting DTC. In addition, the ability of Certificate
Owners to pledge Offered Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of Offered
Certificates, may be limited due to the lack of a physical certificate for such
Offered Certificates. See "Description of the Series 1997-2 Certificates and the
Pooling and Servicing Agreement -- Book-Entry Registration" and " -- Definitive
Certificates."
ABSENCE OF CONTROL ON CERTAIN VOTING MATTERS
Subject to certain exceptions, the holders of certificates of each Series
may take certain actions, or direct certain actions to be taken, under the
Pooling and Servicing Agreement or the related Series Supplement (as defined
below). However, under certain circumstances, the consent or approval of a
specified percentage of the aggregate unpaid principal amount of the
certificates of all outstanding Series will be required to direct certain
actions, including requiring the appointment of a successor Servicer following a
Servicer Default, amending the Pooling and Servicing Agreement under certain
circumstances and directing a reassignment of the entire portfolio of
Receivables. See "Description of the Series 1997-2 Certificates and the Pooling
and Servicing Agreement -- Servicer Default," " -- Amendments,"
" -- Representations and Warranties" and " -- Definitive Certificates."
ISSUANCE OF ADDITIONAL SERIES; MASTER TRUST CONSIDERATIONS
In addition to the Series 1997-2 Certificates, as a master trust, the Trust
may issue additional Series of certificates from time to time. While the
principal terms of any such Series will be specified in the Series Supplement to
the Pooling and Servicing Agreement creating such Series, the provisions of a
Series Supplement and, therefore, the terms of any additional Series, will not
be subject to the prior review or consent of holders of the certificates of any
previously issued Series (including, without limitation, the Offered
Certificates). Such principal terms may include methods for determining
applicable investor percentages and allocating collections, provisions creating
security or enhancement, different classes of certificates (including
subordinated classes of certificates), provisions subordinating such Series to
another Series, and/or including Series as part of a Paired Series or a Group,
and any other amendment or supplement to the Pooling and Servicing Agreement
which is made applicable only to such Series. In addition, the provisions of any
Supplement may give the holders of the certificates issued pursuant thereto
consent, approval or other rights
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that could result in such holders having power to cause the Transferor, the
Servicer or the Trustee to take or refrain from taking certain actions,
including, without limitation, actions with respect to the exercise of certain
rights and remedies under the Pooling and Servicing Agreement, without regard to
the position or interest of the holders of Offered Certificates or certificates
of any other Series. Similar rights may also be given to the provider of any
enhancement for any Series. For example, holders of 50% of the aggregate
investor amount of all outstanding Series may elect to terminate all the rights
and obligations of the Servicer under the Pooling and Servicing Agreement in the
event of a Servicer Default, or in the event of a voluntary or involuntary
bankruptcy of the Transferor. Also, if the Transferor were to become a debtor in
a bankruptcy case or certain other events relating to the insolvency of the
Transferor were to occur, holders of 50% of the investor amount of each class of
each series would have the right to preclude the Trustee from instructing the
Servicer to liquidate the Receivables. It is a condition precedent to issuance
of any additional Series that each Rating Agency that has rated certificates of
any outstanding Series, at the request of the Transferor, deliver written
confirmation to the Trustee that such new issuance will not result in any such
Rating Agency reducing or withdrawing its rating of certificates of any
outstanding Series. There can be no assurance, however, that the principal terms
of any other Series, including any Series issued from time to time hereafter,
might not have an adverse effect on the timing and amount of payments received
by a Certificateholder or the value of Offered Certificates, even if there is no
change in the rating of any outstanding Series. Such adverse effect could result
from, among other factors, a change in allocations of collections of Receivables
among the various Series and the classes thereof. Such a change may occur, for
example, if a Rapid Amortization Period were to occur with respect to a Paired
Series. See "-- Limited Nature of Certificate Rating" and "Description of the
Series 1997-2 Certificates and the Pooling and Servicing Agreement."
EFFECT OF DISCOUNT OPTION
Pursuant to the Pooling and Servicing Agreement, the Transferor has
designated 2% of the amount of Receivables that otherwise would be treated as
Principal Receivables to be treated as Finance Charge Receivables. The
Transferor may, without notice or consent of the Series 1997-2
Certificateholders, from time to time, increase, reduce or eliminate such
percentage. A designation of Principal Receivables to be treated as Finance
Charge Receivables will increase the percentage of collections on the
Receivables that are treated as collections of Finance Charge Receivables, which
will increase the Portfolio Yield to a level higher than it would be in the
absence of such designation. As a result, such designation should decrease the
likelihood of the occurrence of a Pay Out Event based upon a reduction of the
average Portfolio Yield for any three-month period to a rate below the average
Base Rate for such period. However, such designation will also reduce the
aggregate amount of Principal Receivables, which may increase the likelihood
that the Transferor will be required to add Principal Receivables to the Trust
in accordance with the Pooling and Servicing Agreement and which could, if
additional Principal Receivables were not available at such time, cause the
occurrence of a Pay Out Event. A decline in, or the elimination of, the
percentage of Receivables subject to the discount option would reduce the
Portfolio Yield and may increase the possibility of a Pay Out Event arising, if
the average Portfolio Yield for any three-month period is less than the amounts
necessary to pay interest on the Certificates and the Investor Monthly Servicing
Fee for such period. The ability of the Transferor to adjust the amount of
Receivables that otherwise would be treated as Principal Receivables to be
treated as Finance Charge Receivables is limited in certain circumstances. Any
such adjustment will be publicly disclosed by the Servicer in a Current Report
on Form 8-K filed with the Commission under the Exchange Act. See "Description
of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Discount Option Receivables."
EFFECT OF LIMITED SUBORDINATION ON CLASS B CERTIFICATES
The Class B Certificates are subordinated in right of payment of principal
to payments of principal and interest on the Class A Certificates. Payments of
principal in respect of the Class B Certificates will not commence until after
the final principal payment with respect to the Class A Certificates has been
made as described herein. In addition, the Class B Investor Amount is subject to
reduction if the amounts required to be paid in respect of the Class A
Certificates for any Monthly Period are not funded from collections allocable to
the Class A Certificates or the Class B Certificates. If the Class B Investor
Amount suffers such a
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<PAGE> 23
reduction, the portion of collections of Finance Charge Receivables allocable to
the Class B Certificates in future Monthly Periods will be reduced and principal
and interest payments on the Class B Certificates may be delayed or reduced. See
"Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement."
Further, in the event of a sale of the Receivables due to a Pay Out Event,
the portion of the net proceeds of such sale allocable to pay principal of the
Offered Certificates will first be used to pay principal amounts due to the
Class A Certificateholders and any remainder will be used to pay amounts due to
the Class B Certificateholders, thereby causing a loss to Class B
Certificateholders if such remainder is insufficient to pay the Class B
Certificateholders in full. If the Collateral Indebtedness Amount is reduced to
zero, the Class B Certificateholders will bear directly the credit and other
risks associated with their undivided interest in the Trust. See "Description of
the Series 1997-2 Certificates and the Pooling and Servicing Agreement --
Principal Payments" and " -- Pay Out Events."
GEOGRAPHIC CONCENTRATIONS
The Company operates 175 stores in 24 states. Unlike certain of the
Company's competitors that operate nationally, each Department Store has a
regional focus. Proffitt's has 19 stores in six states. Parisian has 40 stores
in seven states. McRae's has 29 stores in four states. Herberger's has 37 stores
in 10 states. Receivables in the Designated Portfolio that originated from
stores located in Alabama, Mississippi, Tennessee and Georgia represent %,
%, % and %, respectively, of the total receivables outstanding in
the Designated Portfolio as of May , 1997. Such geographic concentration will
subject the receivables in the Designated Portfolio to the economic, legal and
other conditions present in such states. Economic trends and other factors in
any of these states, particularly Alabama, Mississippi, Tennessee and Georgia,
could adversely affect collections of Receivables, the generation of new
Receivables and payment rates. See "Credit Card Program -- Geographic
Distribution."
Herberger's only recently began offering proprietary credit cards, and as
it expands its program, and if other selling department stores are added to the
Sellers, the percentages of Accounts Receivables attributable to other states
could increase, thereby potentially reducing or shifting existing concentration
levels. See "-- Social, Legal and Economic Factors" and "Credit Card Program."
GENERAL ECONOMIC CONDITIONS; SEASONALITY
The Company's future performance is subject to prevailing economic
conditions and to all operating risks normally incident to the retail industry.
The Company experiences seasonal fluctuations in sales and net income, with
disproportionately large amounts typically realized during the fiscal fourth
quarter of each year. Sales are generally weakest during the fiscal second
quarter.
INTEGRATION OF ACQUIRED COMPANIES
As part of its business strategy, the Company has successfully consummated
several acquisitions and will regularly evaluate future acquisition
opportunities, including acquisitions of other regional department store chains
and individual stores or locations. The Company's operations and earnings have
been, and will continue to be affected by its ability to continue to
successfully integrate the operations, including proprietary credit cards, of
any acquired businesses or store locations. While the Company has in the past
been successful at effectively integrating the operations of acquired businesses
and managing the related portfolios of proprietary credit cards, there can be no
assurance that the Company will be able to continue to do so. In addition, the
successful integration of operations, including credit card operations will be
subject to numerous contingencies, some of which are beyond the Company's
control. The failure to successfully integrate any such operations with those of
the Company could have a material adverse effect on the Company's financial
position, results of operations and cash flows and the performance of its credit
card portfolios. See "Credit Card Program -- Department Stores."
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's, the Sellers' and the Trust's existing and contemplated operations,
economic performance and financial condition. These statements are based upon a
number of assumptions and estimates which are inherently subject to
uncertainties and contingencies, many of which are beyond the control of the
Company, the Sellers or the Trust, including, among others, the level of
consumer spending for apparel and other consumer goods carried by the Company,
economic conditions, including local and regional economic conditions in the
areas served by the Company, competition among department and specialty stores
and other retail outlets, levels of consumer debt and bankruptcies, changes in
interest rates and inflation, changes in buying, charging and payment behavior
by customers, the effects of weather conditions on seasonal sales in the
Company's markets, competition among department and specialty stores, and the
Company's ability to integrate recent and potential acquisitions. See
"Cautionary Notice Regarding Forward-Looking Statements."
CREDIT CARD PROGRAM
GENERAL
PCC, headquartered in Las Vegas, Nevada, was incorporated as a Nevada
corporation in January 1997. PCC's activities are limited to purchasing credit
card receivables from each of the Sellers, financing those purchases and other
activities directly related to such purchases and financings.
DEPARTMENT STORES
Proffitt's. The Company operates 19 Proffitt's department stores, 12 of
which are in Tennessee, with the remainder in Georgia, North Carolina, Virginia,
Kentucky and West Virginia. Proffitt's stores average approximately 95,000 gross
square feet and approximately $149 in net sales per square foot of selling
space. Proffitt's stores offer moderate to better brand name fashion apparel,
shoes, accessories, cosmetics and decorative home furnishings. Major brands
found in a typical Proffitt's store include Liz Claiborne, Calvin Klein, Jones
New York, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Marisa Christina, Enzo,
Nine West, Timberland, Levi's, Clinique, Lancome and Estee Lauder. Proffitt's
stores are principally anchor stores in leading regional or community malls.
Proffitt's is headquartered in Alcoa, Tennessee.
McRae's. McRae's, which was acquired on March 31, 1994, operates 29
department stores located in Mississippi, Alabama, Florida and Louisiana, 26 of
which are located in Mississippi and Alabama. McRae's stores average
approximately 101,000 gross square feet and approximately $183 in net sales per
square foot of selling space. The merchandise selection of the McRae's stores is
very similar to that of the Proffitt's stores with modifications for regional
tastes. McRae's is headquartered in Jackson, Mississippi.
Parisian. Parisian, which was acquired on October 11, 1996, operates 40
specialty department stores located in nine states, with 33 of its stores
located in the Southeast (Alabama, Florida, Georgia, South Carolina and
Tennessee), with the remainder located in the Midwest (Indiana, Ohio and
Michigan). Parisian stores average approximately 107,000 gross square feet and
approximately $228 in net sales per square foot of selling space. Parisian's
stores are generally anchor stores in enclosed regional and premium malls.
Parisian carries moderate to better apparel, cosmetics, shoes, accessories
and gifts customarily found in other quality department stores, but does not
carry home furnishings, housewares or furniture. In addition to popular brands
found in the Company's other department stores, Parisian carries premium lines
such as Brighton, Robert Talbott, Armani, Coach and MAC cosmetics. Parisian
seeks to create a special shopping experience in its stores through carefully
selected fashion merchandise assortments, attractive store design, exciting
visual presentations and promotional events, and personal amenities that enhance
customer convenience and comfort.
Parisian is headquartered in Birmingham, Alabama. Parisian stores overlap
with McRae's and Proffitt's stores in certain markets. In several instances,
these stores serve as anchor stores in the same mall. The
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<PAGE> 25
Company believes that the product offerings and image of the Parisian chain are
distinct and allow for the successful coexistence of these stores.
Herberger's. Herberger's, which was acquired on February 1, 1997, operates
37 department stores located in ten states throughout the Midwest and Great
Plains states, including Minnesota, Wisconsin, Montana, Nebraska, North Dakota,
South Dakota, Iowa, Illinois, Colorado and Wyoming. Herberger's stores average
approximately 64,000 gross square feet and approximately $143 in net sales per
square foot of selling space. Most Herberger's stores are located in rural
population centers where Herberger's is generally the leading brand name
department store. Such markets typically encompass a retail trade area ranging
in size from approximately 50,000 to 300,000 people, although certain stores are
in larger markets where Herberger's believes it successfully fulfills the
customer's desire for a "neighborhood" department store.
Brands typically found in a Herberger's store include Liz Claiborne, Susan
Bristol, Chaps by Ralph Lauren, Calvin Klein, Woolrich, Timberland, Nike and
Estee Lauder. Prior to its acquisition by the Company, the size and location of
the Herberger's chain made it difficult to establish relationships with certain
popular and premium vendors as an independent company. As one of the Company's
chains, Herberger's has recently received commitments to introduce key brands
such as Tommy Hilfiger, Nautica, and Lancome in certain of its locations during
1997. The Herberger's chain is headquartered in St. Cloud, Minnesota.
Prior to its merger with the Company, Herberger's did not have an existing
proprietary credit card program. Instead, Herberger's had participated in a
co-branded VISA program with a third-party financial institution which has been
terminated. Beginning May 15, 1997, the Company introduced a proprietary credit
card at the Herberger's stores. Based on experience in its other chains, the
Company believes that the introduction of the proprietary credit card will
increase sales, improve customer loyalty and generate additional finance charge
income. The Herberger's proprietary credit card program is administered from the
Company's central credit card services center located in Jackson, Mississippi
(the "Credit Services Center").
Younkers. Younkers, which was acquired on February 3, 1996, is a leading
fashion department store that operates 50 stores located in Iowa, Wisconsin,
Michigan, Nebraska, Illinois, Minnesota and South Dakota. Younkers stores
average approximately 97,000 gross square feet and approximately $149 in net
sales per square foot of selling space. Younkers' stores are generally located
in mid-sized to smaller cities where Younkers is one of the primary department
stores and competition is more limited than in major metropolitan areas.
Younkers stores are full-line department stores which offer a merchandise
selection similar to Proffitt's with modifications for regional taste. In
certain states, Younkers also sells furniture and operates restaurants. Younkers
is headquartered in Des Moines, Iowa. Initially, the Company does not expect to
sell any Younkers proprietary credit card receivables to the Trust.
PROPRIETARY CREDIT CARDS
The Company issues proprietary credit cards for each of the Proffitt's,
McRae's, Younkers, Herberger's and Parisian Department Stores (however, the
Younkers credit card accounts and receivables initially will not be included in
the Trust). Approximately 46.1% of the Company's net sales in fiscal 1996 were
charged to the Company's proprietary credit cards. Frequent use of the Company's
proprietary credit cards by customers is an important element in the Company's
marketing and growth strategies, and generates significant finance charge income
which augments the income received from the sale of merchandise. The Company
believes that proprietary credit card holders shop more frequently with the
Department Stores, purchase more merchandise, and are generally more loyal to
the Department Stores than are customers who use other payment methods. The
Department Stores also make frequent use of the names and addresses of their
respective proprietary credit card holders in direct marketing efforts.
Generally, each of the Department Stores seeks to expand the number and use
of its proprietary credit cards by, among other things, providing incentives to
sales associates to open "instant credit" accounts, which can generally be
opened by sales associates within approximately three minutes using automated
voice response units and other systems operated by the Credit Services Center
that provide rapid credit checks.
21
<PAGE> 26
Also, customers who open accounts are entitled to certain discounts on initial
and subsequent purchases. Recently, the Company has introduced a "Younkers Gold
Card" to preferred customers of Younkers stores which enables such cardholders
to receive "points" for each purchase charged to the Gold Card. Points can be
redeemed for discounts on subsequent purchases at Younkers' stores.
Historically, cardholders redeeming points have tended to make other purchases
in addition to the merchandise purchased through redemption of points. Based on
its experience with the Younkers Gold Card, the Company plans to introduce the
gold card concept in its other Department Stores in Fall 1997.
The Company has an aggregate of approximately four million credit card
accounts outstanding, of which approximately two million accounts have been
active within the last six months. The Company employs state-of-the-art systems
to monitor and administer its credit cards through the Vision 21 system. All
credit card servicing, credit granting, administration and collection functions
have been consolidated and are conducted centrally by the Company's Credit
Services Center. The Company believes that it takes appropriate steps to control
losses on its credit card program. For instance, the Company conducts behavior
scoring on all active card holders semi-annually and utilizes the results to
adjust credit limits and/or terminate certain accounts.
PROPOSED CREDIT CARD BANK
The origination of Receivables at the Department Stores subjects the
Company to regulatory compliance in each of the 24 states in which it currently
operates at least one store. State regulations, among other things, impose
interest ceilings and may restrict the application of certain other Finance
Charges such as late fees. Accordingly, the Company is considering forming a
special purpose credit card bank to issue proprietary credit cards on behalf of
the Company's department stores. The Company believes that the formation of a
national bank as a wholly-owned subsidiary for purposes of issuing proprietary
credit cards would enhance its profitability by: (i) allowing for greater
standardization of terms across all divisions, (ii) providing for the
exportation of interest rates and late fee income across the franchise states,
and (iii) allowing for future flexibility and potential income generation
through various other programs (e.g., co-branded MasterCard and VISA credit
cards). The Company is also considering the introduction of proprietary credit
cards that may be used at all of its Department Stores, as well as co-branded
VISA and MasterCards. The Pooling and Servicing Agreement permits a credit card
bank to be substituted for the Transferor, the Servicer and the Subservicer, the
Accounts of the Department Stores to be transferred to such a bank and
amendments to the Pooling and Servicing Agreement, and the amendment and/or
termination of the Receivables Purchase Agreements to reflect a credit bank,
without the consent of the Certificateholders, provided the Trustee is provided
with acceptable opinions of counsel and provided further that such transaction
is not determined by the applicable Rating Agencies to adversely affect their
ratings of the Offered Certificates. Bank regulatory agencies may require charge
offs of Receivables at an earlier date than the Company's current policy, which
may result in accelerated charge offs.
PORTFOLIO INFORMATION
All information below regarding the credit card accounts relates to the
aggregate portfolio of proprietary credit cards generated by Proffitt's,
Parisian, McRae's and Herberger's (collectively, the "Designated Portfolio"). It
is expected that as of the Cut-Off Date all of the accounts in the Designated
Portfolio will be Eligible Accounts and will be included as Accounts, the
Receivables of which constitute assets of the Trust. The Herberger's proprietary
credit card program was initiated in May 1997 through a mailing to one million
persons, most of whom were believed to be Herberger's customers. Although the
Herberger's credit card program is administered pursuant to the Company's Credit
Card Guidelines applicable to the other Sellers' credit card accounts, the
following tables do not reflect any experience with Herberger's Accounts, and no
assurance can be given that such experience will be similar to the historical
experience of the other Sellers.
22
<PAGE> 27
Receivables outstanding on credit card accounts in the Designated Portfolio
for the periods presented have been as set forth below. There can be no
assurance that the receivables outstanding in the future will be similar to the
historical experience set forth below.
RECEIVABLES OUTSTANDING
DESIGNATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF MAY 31, AS OF DECEMBER 31,
-------------------- ------------------------------------
1997 1996 1996 1995 1994
-------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Receivables Outstanding(1)(2).... $278,038 $279,876 $ 331,635 $ 323,050 $308,271
Number of Accounts(2)............ 926,438 956,221 1,065,399 1,063,322 859,629
</TABLE>
- ---------------
(1) Receivables typically decrease from December to May due to subsequent
payments of holiday purchases.
(2) Includes only Accounts with outstanding balances for Parisian and only
Accounts with outstanding debit balances for the other Sellers.
The Designated Portfolio credit card account balances are currently created
by purchases of merchandise and services (including, without limitation, travel
agency services, dining room charges and alterations) from the Department
Stores. If any of the Department Stores in the future conducts any of their
retail business through one or more subsidiaries, the Designated Portfolio
credit card account balances will also be created by purchases of merchandise
and services (including without limitation travel agency services, dining room
charges and alterations) from such subsidiaries. Accordingly, the Trust depends
on the Department Stores and their ability to generate credit sales. In
addition, since the Department Stores accept other credit cards, including
American Express, MasterCard, VISA and the Discover Card, the Trust will also
depend upon the decisions of customers to use their Department Store proprietary
credit cards rather than other payment methods.
Each of the Department Stores offers its credit card holders a variety of
incentives to use their Department Store credit card accounts. These incentives,
which change from time to time and may be changed at any time in the future,
have included discounts on first day purchases under the Instant Credit program
described below, and discount coupons for new cardholders, for cardholders with
no recent activity in their accounts, and for cardholders whose monthly
purchases exceed a certain level.
There can be no assurance that the Department Stores' credit card sales in
the future will be similar to the historical experience set forth below.
PRIVATE LABEL CREDIT CARD SALES AT THE SELLERS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FIVE MONTHS FOR THE 12 MONTHS
ENDED MAY 31, ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995(1) 1994(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Private Label Credit Card Sales..... $315,836 $316,710 $854,010 $844,558 $810,961
</TABLE>
- ---------------
(1) Not including Proffitt's.
23
<PAGE> 28
SELLERS' SALES BY FORM OF PAYMENT
<TABLE>
<CAPTION>
FOR THE FIVE
MONTHS ENDED FOR THE 12 MONTHS ENDED
MAY 31, DECEMBER 31,
--------------- ---------------------------
1997 1996(1) 1996(1) 1995(2) 1994(2)
----- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Department Stores' Credit Card Accounts............ 45.70% 47.72% 47.46% 50.17% 51.37%
Other Credit Cards................................. 25.44 23.41 23.92 21.96 19.56
Cash, Check or Other............................... 28.86 28.87 28.62 27.87 29.07
</TABLE>
- ---------------
(1) Not including Proffitt's for January 1996.
(2) Not including Proffitt's.
CREDIT ORIGINATION AND UNDERWRITING
All of the Department Stores' credit granting, administration and
collection functions are managed centrally through the Credit Services Center.
The Credit Services Center has taken over these functions from the individual
Department Stores following each acquisition by the Company. All of Parisian's
credit card accounts were converted June 15, 1997 to the Company's systems and
are now managed by the Credit Services Center.
Each Company credit card account is governed by a written agreement
containing the terms and conditions of the account. Pursuant to such agreements,
the Company reserves the right to change or terminate any terms, conditions,
services or features of the account (including, among others, increasing or
decreasing finance charges, other charges or minimum payments).
Credit card accounts of the Department Stores are created through three
principal programs:
New Account Programs
1. IN-STORE "INSTANT CREDIT APPLICATION". Each of the Department
Stores offers instant credit to customers at the time of purchase in
Department Store locations. Excluding accounts obtained through new store
promotions described below and the recent introduction of Herberger's
proprietary credit card, approximately 80% of the Company's new accounts
were generated through in-store instant credit applications. Sales
associates are encouraged through various incentives and promotional events
to open instant credit accounts. To open an instant credit account, the
customer completes the instant credit application at the point of sale. In
order to qualify for an instant credit account, in addition to completing
the application, the customer must have a valid picture identification. On
receipt of the necessary information, the sales associate relays the
information to the Credit Services Center over the telephone. This
information is queued directly into the Vision 21 Application Processing
System. Once all the information is obtained, a full credit report is
obtained, and a credit bureau derived risk score generated. If all Company
policy rules are passed, an account number is immediately assigned by the
system. The credit limit is based on the risk score and other factors
commonly used by creditors.
2. MAIL-IN CREDIT CARD APPLICATION. Like the instant credit
application, mail-in credit applications are also available in the various
Department Stores. Upon completion by the customer, these applications can
be submitted either at the service desk in one of the Department Stores or
mailed to the Credit Services Center. When received, the application is
reviewed for completeness. The application is queued directly into the
Vision 21 Application Processing System and a full credit report is
obtained, and a credit bureau derived risk score is generated. If all
Company policy rules are passed and the risk score is above the cut-off,
then an account number is immediately assigned by the system.
3. PROMOTIONAL (PRE-APPROVED) APPLICATIONS. Promotional
(pre-approved) applications are used as part of the credit solicitation
effort for new store openings. To obtain potential new account holders, the
Company provides the credit bureaus with minimum criteria for potential
account holders in the area to be served by a new store. The lists
generated by the credit bureaus are compared by computer against the
Company's existing account holders to eliminate duplications. All
qualifying names are sent a marketing
24
<PAGE> 29
package which includes information about the relevant Department Store and
its credit card program, plus the new location to be opened, along with an
application to be signed. If the application is returned, signed and
unaltered, a credit limit is established based on an automatic limit
setting risk score matrix. If the application is returned with a change in
name or address indicated, the application is reviewed in a similar manner
to a long form application.
In addition, each of the Department Stores has other credit card plans for
major purchases, and china, silver and crystal products. The credit-granting
procedures are the same as for the Company's other credit program. The Company
also has commercial accounts with a relatively small number of businesses and
organizations. In the aggregate, outstanding balances under major purchase, and
china, silver and crystal programs represented less than approximately 3% of the
Company's total credit card receivables as of the end of its fiscal 1996.
Post-Approval Account Monitoring. No automatic adjustment to an account
holder's credit limit is made during the initial six-months from account
activation. Ongoing monitoring of a customer's credit limit is done through the
use of the credit bureau-generated risk scores in connection with the Company's
periodic portfolio reviews. Portfolio reviews are executed semi-annually or
quarterly based on need as determined by the Credit Services Center. Accounts
are selected and passed to the credit bureau based on the activity in the past
12-months. The credit bureau assigns a risk score to each account record, which
is maintained in the Company's master file for each account. The risk score is a
measure of the customer's current creditworthiness as derived by payment and
delinquency patterns with the entire credit granting community. Based on the
score, number of months with a balance and the current delinquency status of the
account, the credit limit may be raised or lowered.
Automatic Over Limit Authorization. When customers attempt to incur
charges that exceed their designated credit limit ("over limit charges"), the
Vision 21 system will automatically review the account during the authorization
process and determine an acceptable dollar amount of over limit charges for the
customer. The amount of the over limit charge authorization is determined by the
number of times the account has been billed, the current delinquency status of
the account and the account risk score. A credit authorizer may override the
Vision 21 automatic analysis and take the following actions based on certain
pre-defined criteria: increase the credit limit, approve the sale without
increasing the credit limit (customer will be over their credit limit) or reject
the sale. Generally, such credit authorizer would utilize the following tools to
assist in making decisions that promote sales but reduce credit risks to the
Company: (i) portfolio risk score; (ii) length of time the account has been
active; (iii) delinquency/payment history; and/or (iv) a new credit report with
an updated risk score. No over limit fees are charged.
Deactivation/Cancellation of Accounts. Credit card accounts can be
deactivated at the request of the accountholder. An account is automatically
deactivated if it has no balance, and remains unused, for 36 consecutive months.
A deactivated account is removed from the applicable Department Store mailing
list and cannot be used by the accountholder. If an account is deactivated
solely due to non-use, it can generally be reactivated if accountholders present
their credit cards along with evidence of identity and current address. When an
account is reactivated, its credit limit is set at $500 until a new credit
bureau risk score is obtained. If accountholders cannot produce their credit
card or if the deactivation occurred for a reason other than non-use, then the
accountholder must reapply for credit through one of the normal credit
origination programs described above.
BILLING AND PAYMENTS
Generally, the Company uses approximately eight billing cycles within a
month. Each cycle is assigned, on a random basis, an approximately equal number
of accounts. Accounts having all billing cycles will be included in the Trust.
The average daily outstanding balance is determined by taking the beginning
balance of the account each day, adding any new purchases or miscellaneous
debits and subtracting any new payments, miscellaneous credits and unpaid
finance charges (where required by law). The daily balances for each day of the
billing cycle are added together and divided by the total number of days in the
billing cycle to arrive at the average
25
<PAGE> 30
daily outstanding balance. The Department Stores do not charge fees when
customers exceed their credit limits.
Account holders are given a grace period of approximately 25 to 30 days,
depending on the respective Department Store, after each billing cycle closes.
Generally, the respective Department Store assesses interest charges on an
account based upon the average daily balance outstanding on the account during a
monthly billing cycle. However, no finance charge is imposed if there is no
balance at the beginning of the billing cycle and the entire balance of the
account is paid during the grace period. If a payment is not received by the
payment due date, a finance charge is imposed on all purchases from the date of
purchase to the date of repayment, except for residents of Minnesota and
Montana, where purchases and credits (other than payments) are not reflected in
the average daily balance until the beginning of the next billing cycle. Except
for residents of Nebraska and North Carolina, where no minimum finance charge is
imposed, a $.50 minimum finance charge is imposed for any billing cycle in which
a finance charge of less than $0.50 would otherwise be imposed. Interest charges
vary by state, with the annual percentage rate ranging from 18% to 21%.
Subject to applicable laws, account holders are generally charged $25.00 if
a check is dishonored after the second presentment. Late charges are assessed in
accordance with state law. If permitted by state law, a late charge of $5.00 to
$10.00 is assessed for each month a payment is more than 30 days or more past
due. The late fee is not assessed for any month in which an appropriate minimum
payment is made. None of the Department Stores imposes annual fees or
transaction-related service fees.
The Proffitt's and McRae's standard credit card programs were recently
changed to reduce the minimum monthly payment account holders must make from the
greater of 10.0% of the account balance or $10.00 to the greater of 7.5% of the
account balance or $10.00. Herberger's credit cards have the same minimum
payments. Under the Parisian credit card accounts, customers have a no-interest
payment option or an interest-bearing payment option. Currently, under the
Parisian no-interest payment option, the required minimum payment is one-sixth
( 1/6th) of the highest account balance over the prior six months. Also, under
the current Parisian interest-bearing payment option, the minimum payment is
one-twelfth ( 1/12th) of the highest balance over the prior 12 months. Parisian
is considering a change to these minimum payment provisions to the following
terms: (i) the greater of 25% of the ending balance or $25 for the no-interest
payment option, and (ii) the greater of 7.5% of the ending balance or $10 for
the interest-bearing option. Payments by account holders are applied first to
interest and other charges or fees, and then to purchases in the order made.
Each such minimum payment specified in this paragraph is referred to herein as a
"qualified minimum payment."
Under the Proffitt's, McRae's and Herberger's china, silver and crystal
plans, account holders can purchase such merchandise on an installment basis
with no finance charges for a period of 24 months. The monthly payment under
such plan is equal to one-twenty-fourth ( 1/24th) of the highest balance in
existence since the account last had a zero balance. Under the McRae's,
Proffitt's and Herberger's major purchase plans, the account holder has the
option to pay one-third of the highest balance for three consecutive months
without incurring finance charges. Under the Parisian Plus Account for certain
large purchases, cardholders have the option to make monthly payments each month
equal to one-twelfth ( 1/12th) of the highest balance of the last 12 months and
incur no finance charge, or equal to one twenty-fourth ( 1/24th) of the highest
balance over the last 24 months and incur finance charges at normal rates for
Parisian credit cards.
From time to time, each of the Department Stores offers deferred billing
promotions to their respective credit card account holders. These promotions
typically allow the account holder to delay the billing of the account for up to
90 days for specific purchases. During the deferred billing periods, the
purchases either do not appear on the customer's statement or appear but are not
added to the outstanding balances. No finance charges accrue on such purchases
until they have been billed, at which point they are treated like ordinary
purchases (that is, a grace period is available until the payment due date,
unless the card holder has a balance when the deferred purchase is billed, in
which case finance charges accrue from the date the purchase is billed). All
purchases are, however, immediately recorded on the Company's credit
authorization system, which reduces the customer's available credit limit
accordingly. Approximately 2% of the Company's credit sales for fiscal year 1996
were done on a deferred billing basis, with an average deferred period of 90
days.
26
<PAGE> 31
Receivables, including Receivables in deferred billing accounts, will be
included in the Trust from the date such Receivables are created.
DELINQUENCY, COLLECTIONS AND LOSSES
The Company measures delinquency by the number of days an account is past
due, and accounts move into the collection queue based on contractual
delinquency. When an account becomes one payment past due, a reminder is printed
on the bottom of the next account statement. When an account becomes two
payments past due, a suspension message is printed on the statement notifying
the customer that they will be unable to use their credit card account until
payment is made. The account enters the collection system at this point and is
scheduled for collection department action 10 days later (i.e., the 40th day
past due). When an account ages to 40 days past due, a reminder letter is mailed
to the customer. Accounts between 40 and 119 days past due are worked randomly
by collectors over the telephone using a predictive autodialer system. When the
account is 60 days past due, (i) a stronger message appears on the customer's
statement and (ii) a third party collection letter is sent to the customer
notifying the customer that additional purchases are not permitted to be
charged. As an account becomes 120 days past due the account is assigned to a
late stage collector for stronger collection efforts, including (i) skip tracing
(using credit bureau sources, address and neighbor information and
cross-reference directory searches), (ii) customized customer demand notices,
(iii) specialized phone-based collection techniques, including predictive
autodialing, and (iv) selective utilization of collection agencies and
attorneys.
Delinquent accounts are removed from the collection queue and returned to
current status if three consecutive qualified minimum payments or, in the case
of Proffitt's, McRae's and Herberger's, three payments aggregating 22.5% or more
of the outstanding balance and in the case of Parisian, three payments
aggregating 25% or more of the outstanding balance, are received. No delinquent
account is permitted to be cured more than once every six months. In addition,
in limited circumstances, the Company will re-age delinquent accounts prior to
or without evidence of a payment. Such circumstances include bill adjustment
problems, and untimely receipt of billing statements.
Accounts are turned over to outside collection agencies at different times
based on the outstanding balance and the number of months without proper
payment. Generally, all accounts are assigned to a collection agency or attorney
following the charge off of the account.
The Company's current policy generally recognizes losses on the seventh
month after the customer has failed to make a qualified minimum payment. The
Company may recognize losses earlier if an account is determined to be
uncollectible, if the customer is deceased or if the customer has filed
bankruptcy. In certain instances, losses may not be recognized on accounts that
satisfy the charge off criteria set forth above if the Credit Services Center
believes that the account will be paid.
The Company's credit evaluation, servicing and charge off policies and
collections practices may change at any time as dictated by the Company's
business judgment and applicable law.
27
<PAGE> 32
The following table sets forth the loss experience with respect to the
credit card accounts in the Designated Portfolio for each of the periods shown.
There can be no assurance that future loss experience for the Receivables will
be similar to the historical experience set forth below. See "Risk Factors."
LOSS EXPERIENCE OF THE DESIGNATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FIVE MONTHS FOR THE 12 MONTHS
ENDED MAY 31, ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Principal Receivables(1)........................... $289,667 $283,805 $277,619 $266,101 $249,089
Total Principal Charge Offs(2)............................. 4,991 4,046 10,856 8,732 7,190
Recoveries................................................. 1,080 954 2,166 2,060 1,885
Net Principal Charge Offs.................................. 3,911 3,091 8,690 6,671 5,304
Net Principal Charge Offs Percentage(3).................... 3.24% 2.61% 3.13% 2.51% 2.13%
</TABLE>
- ---------------
(1) Average Principal Receivables for a particular period is the average of the
principal balances outstanding at the beginning and the end of each month
during such period.
(2) Total Principal Charge Offs are charge offs before Recoveries and do not
include fraud losses.
(3) The percentages for the five months ended May 31, 1997 and 1996 are
annualized figures, which are not necessarily indicative of results that may
be realized for the entire year.
The following tables set forth the delinquency experience with respect to
payments by cardholders that were 31 days or more past due for each of the
periods shown for the Designated Portfolio. Because delinquencies are affected
by a number of factors, including competitive and general economic conditions
and consumer debt levels, there can be no assurance that the delinquency
experience for the Receivables, including but not limited to, Receivables in
Herberger's Accounts, in the future will be similar to the historical experience
set forth below.
HISTORICAL DELINQUENCIES
DESIGNATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF MAY 31, AS OF DECEMBER 31,
--------------------------------------------------------- -----------------------------------------
1997 1996 1996 1995
--------------------------- --------------------------- --------------------------- -----------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
RECEIVABLES TOTAL RECEIVABLES TOTAL RECEIVABLES TOTAL RECEIVABLES
(3) RECEIVABLES (3) RECEIVABLES (3) RECEIVABLES (3)(5)
----------- ------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current(1)............ $265,257 95.30% $269,955 95.47% $319,503 96.05% $311,923
31 to 60 days
delinquent.......... 6,782 2.44 7,284 2.58 6,972 2.10 6,658
61 to 90 days
delinquent.......... 2,322 0.83 1,875 0.66 2,230 0.67 1,994
Over 91 days
delinquent.......... 3,981 1.43 3,659 1.29 3,940 1.18 3,726
-------- ------ -------- ------ -------- ------ --------
Total
Delinquent...... 13,084 4.70 12,818 4.53 13,141 3.95 12,378
-------- ------ -------- ------ -------- ------ --------
Total
Receivables..... $278,341 100.00% $282,773 100.00% $332,644 100.00% $324,301
======== ====== ======== ====== ======== ====== ========
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------
1995 1994
------------- ---------------------------
PERCENTAGE OF PERCENTAGE OF
TOTAL RECEIVABLES TOTAL
RECEIVABLES (2)(3)(4) RECEIVABLES
------------- ----------- -------------
<S> <C> <C> <C>
Current(1)............ 96.18% $229,059 95.73%
31 to 60 days
delinquent.......... 2.05 6,475 2.71
61 to 90 days
delinquent.......... 0.61 1,437 0.60
Over 91 days
delinquent.......... 1.15 2,311 0.97
------ -------- ------
Total
Delinquent...... 3.82 10,223 4.27
------ -------- ------
Total
Receivables..... 100.00% $239,282 100.00%
====== ======== ======
</TABLE>
- ---------------
(1) Includes both current accounts and accounts that are less than 31 days past
due.
(2) 1994 data as of January 31, 1995.
(3) For Parisian, the number of Accounts and Receivables outstanding are
compiled from data as of each billing cycle date during the period
specified. All other Accounts and Receivables are as of the end of the
specified date.
(4) Excludes Proffitt's data.
(5) Proffitt's delinquencies are excluded from January 1995 through July 1995.
The Company's net principal charge-offs and delinquencies at any time
reflect, among other factors, the overall credit quality of the cardholders, the
seasoning of the accounts, the success of the Company's collection efforts and
general economic conditions. As shown above, net principal charge offs as a
percentage of average principal receivables outstanding for the 12 months ended
December 31 were 2.13% for 1994, 2.51% for 1995, and 3.13% for 1996. In
addition, net principal charge offs as a percentage of average principal
receivables outstanding were 2.61% for the five months ended May 31, 1996, and
3.24% for the five months ended May 31, 1997. Delinquent receivables as a
percentage of total receivables outstanding were 4.27% as of January 31, 1995,
3.82% at December 31, 1995, and 3.95% at December 31, 1996. In addition,
delinquent receivables as a percentage of total receivables outstanding were
4.53% at May 31, 1996 and 4.70% at May 31,
28
<PAGE> 33
1997. The Company believes that these trends are comparable with those exhibited
by its competitors and other providers of consumer revolving credit.
Newly originated accounts generally exhibit higher delinquencies and losses
than seasoned accounts beginning approximately six months from issuance and
reach a steady state within approximately two to three years. The Company
believes that this tendency has not had a material impact on the Designated
Portfolio given the moderate growth historically exhibited by the Designated
Portfolio. In addition, the Company believes that the trends exhibited in the
Designated Portfolio (of moderately increasing losses and delinquencies) are
consistent with general economic conditions in the United States, particularly
the nationwide rise in consumer loan delinquencies and the rise in personal
bankruptcy filings. The Company's focus is on maintaining the profitability of
each account and selling merchandise within the context of acceptable risk
characteristics. The Company believes that its underwriting procedures and risk
management policies will keep the loss and delinquency experience approximately
the same as historical ranges. See "-- Credit Origination and Underwriting" and
"Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Addition of Accounts."
COMPOSITION OF THE DESIGNATED PORTFOLIO
GENERAL
The information describing the Designated Portfolio reflects its
composition as of the dates shown. There can be no assurance that the
composition and performance of the Designated Portfolio in the future will be
similar to the historical experience reflected below.
COMPOSITION OF ACCOUNTS
BY AGE
AS OF JULY 11, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL PERCENTAGE OF TOTAL
NUMBER OF RECEIVABLES RECEIVABLES
NUMBER OF ACCOUNTS(1) ACCOUNTS OUTSTANDING OUTSTANDING
--------------------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C>
Under 6 months........................... 335,988 15.04% $ 24,134 8.63%
6 months to 1 year....................... 166,738 7.47 16,575 5.93
1-2 years................................ 241,412 10.81 22,637 8.10
2-3 years................................ 312,871 14.01 32,377 11.58
3 years and older........................ 1,176,396 52.67 183,872 65.76
--------- ------ -------- ------
Total............................ 2,233,405 100.00% $279,595 100.00%
========= ====== ======== ======
</TABLE>
- ---------------
(1) Includes all active Accounts.
29
<PAGE> 34
COMPOSITION OF THE DESIGNATED PORTFOLIO
BY ACCOUNT BALANCE
AS OF JULY 11, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF PERCENTAGE OF TOTAL RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS(1) NUMBER OF ACCOUNTS OUTSTANDING OUTSTANDING
- --------------------- ----------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C>
No Balance(2)..................................... 1,208,710 54.12% $ -- 0.00%
$0.01 to $500.00.................................. 817,575 36.61 135,755 48.55
$500.01 to $1,000.00.............................. 118,846 5.32 81,376 29.11
$1,000.01 to $2,000.00............................ 34,263 1.53 45,351 16.22
$2,000.01 to $3,000.00............................ 4,915 0.22 11,644 4.16
$3,000.01 to $4,000.00............................ 1,192 0.05 4,071 1.46
$4,000.01 to 5,000.00............................. 347 0.02 1,542 0.55
$5,000.00+........................................ 266 0.01 2,000 0.72
Credit balance(3)................................. 47,291 2.12 (2,144) (0.77)
--------- ------ -------- ------
Total..................................... 2,233,405 100.00% $279,595 100.00%
========= ====== ======== ======
</TABLE>
- ---------------
(1) Includes all active Accounts.
(2) Accounts currently having no outstanding balance are included, because
Receivables may be generated in such Accounts in the future.
(3) Credit balances are a result of cardholder payments and credit adjustments
applied in excess of an Account's unpaid balance. Accounts currently having
an outstanding credit balance are included, as Receivables may be generated
in such Accounts in the future.
COMPOSITION OF THE DESIGNATED PORTFOLIO
BY CREDIT LIMIT
AS OF JULY 11, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF OF
NUMBER OF TOTAL NUMBER AGGREGATE AGGREGATE
CREDIT LIMIT ACCOUNTS(1) OF ACCOUNTS CREDIT LIMIT CREDIT LIMIT
- ------------ ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C>
Zero....................................... 69,121 3.09% -- 0.00%
$0.01 - $600.00............................ 580,762 26.00 253,753 7.14
$600.01 - $1,000.00........................ 432,154 19.35 384,988 10.83
$1,000.01 - 2,000.00....................... 725,444 32.48 1,086,939 30.59
$2,000.01 - 3,000.00....................... 113,370 5.08 293,982 8.27
$3,000.01 - 4,000.00....................... 14,935 0.67 53,141 1.50
$4,000.01 - 5,000.00(2).................... 295,097 13.21 1,460,742 41.11
$5,000.01 or more.......................... 2,522 0.11 19,761 0.56
--------- ------- ---------- -------
Total............................ 2,233,405 100.00% $3,553,306 100.00%
========= ======= ========== =======
</TABLE>
- ---------------
(1) Includes all active Accounts.
(2) The concentration of Accounts in the $4,000.01 - $5,000.00 credit limit
range is due to the fact that this is the highest credit limit assigned
without special exceptions.
30
<PAGE> 35
COMPOSITION OF THE DESIGNATED PORTFOLIO
BY PAYMENT STATUS
AS OF JULY 11, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF PERCENTAGE OF TOTAL RECEIVABLES RECEIVABLES
PAYMENT STATUS ACCOUNTS(1) NUMBER OF ACCOUNTS OUTSTANDING(1) OUTSTANDING
- -------------- ----------- ------------------- -------------- -------------------
<S> <C> <C> <C> <C>
Current(2).......................... 951,092 97.31% $272,644 96.77%
31 to 60 days delinquent............ 11,450 1.17 3,611 1.28
61 to 90 days delinquent............ 5,128 0.52 1,813 0.64
Over 91 days delinquent............. 9,734 1.00 3,670 1.30
------- ------- -------- -------
Total..................... 977,404 100.00% $281,739 100.00%
======= ======= ======== =======
</TABLE>
- ---------------
(1) Includes only Accounts with outstanding balances for Parisian and only
Accounts with outstanding debit balances for the other Sellers.
(2) Includes all Accounts that are current or less than 31 days past due.
GEOGRAPHIC DISTRIBUTION
Except for the states listed below, no state accounted for more than 5% of
the number of active aggregate store credit card accounts in the Designated
Portfolio or 5% of the Receivables outstanding in the Designated Portfolio as of
July 11, 1997.
GEOGRAPHIC DISTRIBUTION OF THE DESIGNATED PORTFOLIO
AS OF JULY 11, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL PERCENTAGE OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
STATE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ----- --------- ------------------- ----------- -------------------
<S> <C> <C> <C> <C>
Alabama................................. 634,507 28.41% $107,419 38.42%
Mississippi............................. 263,296 11.79 51,019 18.25
Tennessee............................... 271,971 12.18 35,484 12.69
Georgia................................. 212,353 9.51 25,127 8.99
Florida................................. 150,053 6.72 13,246 4.74
Other................................... 701,225 31.40 47,301 16.92
--------- ------- -------- -------
Total......................... 2,233,405 100.00% $279,596 100.00%
========= ======= ======== =======
</TABLE>
31
<PAGE> 36
THE ACCOUNTS
At the Closing Date, the Accounts will consist of all eligible credit card
accounts of the Department Stores as of the close of business on the Cut-Off
Date and those accounts added thereafter prior to the Closing Date. Additional
eligible accounts originated in the normal operation of the credit card business
of the Sellers generally will be added on a daily basis as Automatic Additional
Accounts. In addition, subject to the provisions of the Pooling and Servicing
Agreement, certain eligible accounts relating to acquired businesses may in the
future be added as Additional Accounts or Automatic Additional Accounts.
The Accounts include all of Proffitt's, Parisian's, McRae's and Herberger's
credit card accounts existing as of the Cut-Off Date which are Eligible Accounts
and the Receivables will include all amounts payable by accountholders under
such Accounts which are Eligible Receivables. As a result some of the Accounts
will be recently solicited, unseasoned accounts (e.g. Receivables generated by
Herberger's). See "Credit Card Program" and "Description of the Series 1997-2
Certificates and the Pooling and Servicing Agreement -- Representations and
Warranties."
An "Eligible Account" means, as of the date of its selection, each Account
(a) which is in existence and owned by any Eligible Originator or the
Transferor, and payable in United States Dollars, (b) the Obligor of which has
provided, as its most recent billing address, an address which is located in the
United States or its territories or possessions, (c) which relates to credit
cards that have not been reported lost or stolen or designated by the Servicer
to be counterfeit or fraudulent, (d) in which the Receivables have not been
charged off in accordance with the Credit Card Guidelines, (e) which was
originated or acquired by or on behalf of a Seller (each, an "Eligible
Originator"), (f) which has not been identified in the Transferor or Servicer's
computer files as having been cancelled due to the Obligor's bankruptcy or
death, (g) which does not have Receivables which are then subject to any sale,
assignment or pledge to any party other than the Transferor or the Trust
pursuant to the Receivables Purchase Agreements and the Pooling and Servicing
Agreement and (h) with respect to which the Transferor or any corporate
affiliate of the Transferor is not the Obligor.
An "Eligible Receivable" means each Receivable (a) which has arisen under
an Eligible Account, (b) which was created in compliance with all applicable
requirements of law pursuant to a credit card account agreement which complies
with all requirements of applicable law, in either case the failure to comply
with which would have a material adverse effect upon the Certificateholders, (c)
with respect to which all material consents, licenses, approvals or
authorizations of, or registrations with, any governmental authority required to
be obtained or given by an Eligible Originator or by the Transferor in
connection with the creation of such Receivable or the execution, delivery and
performance by such Eligible Originator of the credit card account agreement
pursuant to which such Receivable was created, have been duly obtained or given
and are in full force and effect as of such date of creation, (d) as to which,
at the time of the transfer of such Receivable to the Trust by the Transferor,
the Transferor will have good and marketable title thereto free and clear of all
liens (other than as permitted under the Pooling and Servicing Agreement,
including certain tax liens for taxes not then due or which the Transferor is
contesting in good faith), (e) which will at all times be the legal, valid and
binding payment obligation of the obligor thereof (the "Obligor"), enforceable
against such Obligor in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general ("Debtor Relief Laws") and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity), (f) which constitutes either an
"account," a "general intangible" or "chattel paper" under and as defined in
Article 9 of the UCC as then in effect in the jurisdictions where UCC filings
are required to perfect and maintain the security interest of the Trustee (the
"Relevant UCC State"), (g) which, at the time of transfer to the Trust, has not
been waived or modified except in accordance with the Credit Card Guidelines (or
as permitted in the Pooling and Servicing Agreement), (h) which, at the time of
transfer to the Trust, is not (to the knowledge of the Transferor or the
Servicer) subject to any claim of rescission, set-off, counterclaim or any other
defense (including defenses arising out of violations of usury laws) of the
Obligor, which requires that such Receivable be charged off in accordance with
the Credit Card Guidelines, other than defenses arising out of applicable Debtor
Relief Laws and equity related defenses, (i) as to which, at the time of
transfer to the Trust, each of the Transferor and the
32
<PAGE> 37
Eligible Originator has satisfied all obligations required to be satisfied by
such time, (j) as to which the Eligible Originator and/or the Transferor has
done nothing, as of the time of its transfer to the Trust, to impair the rights
of the Trust or holders of Certificates of any Series outstanding therein and
(k) which has been the subject of either a valid transfer and assignment from
the Transferor to the Trust of all of the Transferor's right, title and interest
therein or the grant of a first priority perfected security interest therein
(and in the proceeds thereof to the extent set forth in Section 9-306 of the UCC
as in effect in the Relevant UCC State, effective until the termination of the
Trust.
The Receivables arising from the Accounts as of the Cut-Off Date reflect
balances which include unpaid principal, finance charges, and credit insurance
if applicable.
Pursuant to the Pooling and Servicing Agreement, the Transferor has the
right (and, under certain circumstances, the obligation), subject to certain
limitations and conditions discussed under "Description of the Series 1997-2
Certificates and the Pooling and Servicing Agreement -- Addition of Accounts,"
to designate from time to time additional qualifying Company credit card
accounts to be included as Additional Accounts and to transfer to the Trust all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created. New accounts generated by the Sellers (including
any additional entities hereafter included as Sellers) generally will be
included automatically as Accounts on an ongoing basis, subject to the right of
the Transferor in its sole discretion, to cease such automatic additions.
Further, pursuant to the Pooling and Servicing Agreement, the Transferor has the
right, subject to certain limitations and conditions discussed under
"Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Removal of Accounts," to designate certain Accounts to be removed
from the Trust and to require the Trustee to retransfer all Receivables in such
removed Accounts to the Transferor. See "Description of the Series 1997-2
Certificates and the Pooling and Servicing Agreement -- Transfer of
Receivables."
The Receivables arising from the Accounts as of the Cut-Off Date totaled
$ , of which $ ( % of the Receivables) were Principal
Receivables (without reduction for Discount Option Receivables), $ ( %
of the Receivables) were Finance Charge Receivables (without inclusion of
Discount Option Receivables) and $ ( % of the Receivables) were
Discount Option Receivables. See "Description of the Series 1997-2 Certificates
and the Pooling and Servicing Agreement -- Investor Percentages and Transferor
Percentage."
THE TRUST
The Trust was formed in accordance with the laws of the State of New York
pursuant to the Pooling and Servicing Agreement. The Trust was formed for the
transactions relating to the issuance of the Series 1997-1 Variable Funding
Certificates, the transactions described herein, and similar transactions, as
contemplated by the Pooling and Servicing Agreement, and prior to formation had
no assets or obligations. The Trust will not engage in any business activity,
other than as described herein, but rather will only acquire and hold the
Receivables, issue (or cause to be issued) the Series 1997-2 Certificates, the
Exchangeable Transferor Certificate, and certificates representing additional
Series, and make payments on the Certificates and conduct activities incidental
thereto. Accordingly, the Trust is not expected to have any need for additional
capital resources. See "Annex I -- Series Previously Issued."
PCC
PCC was incorporated in Nevada in January 1997, and is wholly-owned,
directly and indirectly, by Proffitt's, Inc. PCC was organized for the limited
purposes of purchasing accounts receivable such as the Receivables from the
Company, forming trusts such as the Trust and transferring such accounts
receivable to such trusts. Prior to the formation of the Trust, PCC's sole
activity was to act as transferor of certain accounts receivable in connection
with a receivables purchase facility. The principal executive offices of PCC are
located at Bank of America Plaza, Suite 1100, 300 South Fourth Street, Las
Vegas, Nevada 89101. Its telephone number is (702) 598-3738.
33
<PAGE> 38
THE COMPANY
The Company is a leading regional department store chain operating 175
stores in 24 states, primarily in the Southeast and Midwest. Most of the stores
are located in premier regional malls in the respective trade areas served. The
Company's stores offer a wide selection of fashion apparel, accessories,
cosmetics and decorative home furnishings, featuring assortments of premier
brands, private brands and specialty merchandise. Each of the Company's chains
operates with its own merchandising, marketing and store operations team in
order to tailor regional assortments to the local customer. At the same time,
the Company coordinates merchandising among the chains and consolidates
administrative and support functions to realize scale economies, to promote a
competitive cost structure and to increase margins.
Under the leadership of an experienced senior management team, the Company
has executed a disciplined acquisition strategy and strategic approach to new
store openings, growing from 11 stores and net sales of $94.8 million in fiscal
1989 to 175 stores and pro forma net sales of $2.3 billion in fiscal 1996.
The Company was incorporated under the laws of the State of Tennessee in
1919. The principal executive offices of the Company are located at 3455 Highway
80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400.
USE OF PROCEEDS
The Trustee on behalf of the Trust will issue the Series 1997-2
Certificates to or upon the order of the Transferor. The entire net proceeds
received from the sale of the Offered Certificates and the Collateral
Indebtedness Interest, which are expected to be $ before deduction of
expenses, will be paid to the Transferor. The Transferor will use substantially
all such funds to repay all outstanding amounts owed with respect to the
Transferor's sales of receivables to an asset-backed commercial paper conduit of
which an affiliate of NCMI serves as agent. Such conduit is supported by certain
of the receivables in the Designated Portfolio. The conduit facility is funded
by commercial paper with a maturity of 30 days or less and with floating
interest rates approximating the commercial paper composite rate, and such
commercial paper facility will be terminated upon repayment on the Closing Date.
Approximately $ of the net proceeds from the sale of the Registrant's
Variable Funding Certificates pursuant to Series 1997-1 will also be used to
repay such commercial paper borrowing conduit. See "Underwriting."
MATURITY ASSUMPTIONS
The Pooling and Servicing Agreement provides that the Class A
Certificateholders will not receive payments of principal until the Class A
Expected Payment Date, except in the event of a Pay Out Event which results in
the commencement of the Rapid Amortization Period. The Class B
Certificateholders will not receive payments of principal until the Class B
Expected Payment Date, except in the event of a Pay Out Event which results in
the commencement of the Rapid Amortization Period; provided that in no event
will the Class B Certificateholders receive payments or principal until the
Class A Certificates have been paid in full. See "Description of the Series
1997-2 Certificates and the Pooling and Servicing Agreement -- Pay Out Events"
and "Risk Factors -- Effect of Payment Rate on Certificates."
Assuming that the Rapid Amortization Period has not commenced, during the
Accumulation Period, a portion of the collections in respect of the Receivables
equal to the product of the Investor Percentage with respect to collections of
Principal Receivables and collections in respect of Principal Receivables
received during such Monthly Period will be deposited in the Principal Account.
Such amount to be deposited is limited to the applicable Controlled Accumulation
Amount (equal to $ and $ with respect to the Class A
Accumulation Period and Class B Accumulation Period, respectively), subject to
adjustment during the Class A Accumulation Period based on the calculated
Accumulation Period Length beginning with the first Distribution Date of the
Accumulation Period and ending when the amount held in the Principal Account is
sufficient to pay the Class A Investor Amount in full. In addition, any existing
Deficit Controlled Accumulation Amount will be deposited into the Principal
Account. Amounts held in the Principal Account will be paid to the Class A
Certificateholders on the Class A Expected Payment Date and to the Class B
34
<PAGE> 39
Certificateholders on the Class B Expected Payment Date, respectively, or in
each case, the first Distribution Date during the Rapid Amortization Period, if
earlier. A decline in the rate of cardholder reborrowing together with a decline
in the rate of establishing new Accounts during the Accumulation Period could
extend the time of repayment of principal to the Certificateholders, resulting
in a longer term exposure to loss and liquidity concerns by holders of the
Offered Certificates.
Should a Pay Out Event occur and the Rapid Amortization Period begin,
collections of Principal Receivables distributable or to be deposited with
respect to the Class A Investor Amount or the Class B Investor Amount will no
longer be limited to the Controlled Accumulation Amount. Instead, collections of
Principal Receivables allocated to the Investor Amount will be distributed
monthly in their entirety on each Distribution Date to the Certificateholders,
beginning with the Distribution Date in the month following the commencement of
the Rapid Amortization Period. The Class B Investor Amount will generally begin
amortizing only after the Class A Investor Amount is paid in full, the
Collateral Indebtedness Amount will generally begin amortizing only after the
Class B Investor Amount is paid in full and the Class D Investor Amount will
begin amortizing only after the Collateral Indebtedness Amount is paid in full.
Allocations based upon the fixed percentage during the Rapid Amortization Period
may result in greater distributions of principal to Certificateholders than
would be the case if a floating percentage were used to determine the percentage
of collections distributed in respect of the Investor Amount. The Offered
Certificates are also subject to an optional repurchase by the Transferor if the
current Adjusted Investor Amount is 10% or less of the Initial Investor Amount.
See "Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Optional Repurchase; Final Payment of Principal; Termination."
Principal payments on the Offered Certificates will begin prior to their
respective Expected Payment Dates in the event of a Pay Out Event. Pay Out
Events may be caused, by among other things, a decrease in Portfolio Yield or an
inability to generate sufficient new Receivables. A reduction in Portfolio Yield
may result from reductions in collections of Finance Charge Receivables or an
increase in charge offs. A reduction in collections of Finance Charge
Receivables may occur as a result of increased delinquencies, or as a result of
increased payments of principal being made by cardholders on a monthly basis.
Such increased payments would result in lower finance charges being assessed. A
decline in the rate of reborrowing or a decline in the rate of establishing new
Accounts would also contribute to a reduction in the creation and collection of
Finance Charge Receivables. The Offered Certificates will be paid after their
respective Expected Payment Dates if sufficient Principal Receivables are not
collected during the Accumulation Period. A reduction in collections of
Principal Receivables may occur due to a reduction in payment rates.
Although it is anticipated that principal payments will be made to Class A
Certificateholders and to the Class B Certificateholders on the Class A Expected
Payment Date and on the Class B Expected Payment Date, respectively, no
assurance can be given in that regard. The ability of the Trust to make such
payments depends on the payment rates on the Receivables, the amount of
outstanding Receivables from time to time, delinquencies, the rate of charge
offs on the Receivables, the potential issuance by the Trust of additional
Series and the availability of Shared Principal Collections. The Transferor
cannot predict, and no assurance can be given as to, any of the foregoing. Thus
no assurance can be given as to the actual rate of payment of principal of the
Offered Certificates. See "Risk Factors," "Credit Card Program" and "Composition
of the Designated Portfolio."
The following table sets forth the highest and lowest credit card
accountholder monthly payment rates for the Designated Portfolio during any
month in the periods shown and the average accountholder monthly payment rates
for all months during the periods shown, in each case calculated as a percentage
of the total opening monthly credit card account balances during the periods
shown. Payments shown in the table include amounts which would be deemed
payments of Principal Receivables and Finance Charge Receivables with
35
<PAGE> 40
respect to the Accounts. There can be no assurance that monthly payment rates in
the future will be similar to this historical experience. See "Risk Factors."
ACCOUNTHOLDER MONTHLY PAYMENT RATES(1)
DESIGNATED PORTFOLIO
<TABLE>
<CAPTION>
FOR THE FIVE
MONTHS FOR THE 12 MONTHS
ENDED MAY 31, ENDED DECEMBER 31,
-------------- -----------------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Lowest Month....................................... 21.41% 20.54% 20.54% 21.87% 22.24%
Highest Month...................................... 22.80 22.76 22.76 24.69 23.79
Monthly Average.................................... 21.95 22.11 22.02 22.80 23.02
</TABLE>
- ---------------
(1) The monthly payment rates are calculated as the amount of total payments
received during the month, divided by total Receivables outstanding at the
beginning of each month.
The amount of collections on Receivables may vary from month to month due
to seasonal variations, general economic conditions and the payment habits of
individual accountholders. There can be no assurance that collections of
Principal Receivables with respect to the Accounts, and thus the rate at which
Certificateholders could expect to receive payments of principal on their
Offered Certificates, will be similar to the historical experience set forth
above. In addition, if a Pay Out Event occurs, the average life and maturity of
the Offered Certificates could be significantly reduced.
Because there may be a slow-down in the payment rate below the payment rate
used to determine the Controlled Accumulation Amount or a Pay Out Event may
occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the beginning of the
Accumulation Period to the final Distribution Date with respect to the Offered
Certificates will equal the expected number of months. The amount of outstanding
Receivables and the rates of payments, delinquencies, write-offs and new
borrowings on the Accounts depend upon a variety of factors, including seasonal
variations, the availability of other sources of credit, general economic
conditions and consumer spending and borrowing patterns. Accordingly, there can
be no assurance that future accountholder monthly payment rate experience will
be similar to historical experience.
RECEIVABLES YIELD CONSIDERATIONS
The yield for active credit card accounts in the Designated Portfolio for
each of the periods shown is set forth in the following table. The historical
yield figures in the table are calculated on an as-billed basis. Collections on
Receivables included in the Trust will be on a cash-collection basis and may not
reflect the historical yield experience in the table. Revenues from finance
charges and fees will be affected by numerous factors, including the rates of
the finance charges on Principal Receivables, the amount of other fees paid by
accountholders, the percentage of accountholders who pay off their balances in
full each month or who have the benefit of a deferred billing or interest free
option and thus do not incur monthly periodic charges on
36
<PAGE> 41
purchases, and changes in delinquency rates. There can be no assurance that the
portfolio yield in the future will be similar to the historical experience set
forth below. See "Risk Factors."
PORTFOLIO YIELD
DESIGNATED PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FIVE MONTHS FOR THE 12 MONTHS
ENDED MAY 31, ENDED DECEMBER 31,
-------------------- --------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Average Receivables(1).............. $293,534 $287,413 $281,184 $269,306 $252,982
Billed Finance Charges and Fees..... $ 19,273 $ 18,009 $ 42,314 $ 38,540 $ 36,070
Portfolio Yield(2).................. 15.76% 15.09% 15.05% 14.31% 14.26%
</TABLE>
- ---------------
(1) Average Receivables for a particular period is the average of the total
balances outstanding at the beginning and the end of each month during such
period.
(2) The percentages for the five months ended May 31, 1997 and 1996 are
annualized figures, which are not necessarily indicative of results that may
be realized for the entire year.
POOL FACTORS
The "Class A Pool Factor," the "Class B Pool Factor," the "Collateral Pool
Factor" and the "Class D Pool Factor" are each a seven-digit decimal, which the
Servicer will compute monthly, expressing as of each Record Date: the Class A
Investor Amount as a proportion of the Class A Investor Amount as of the Closing
Date, the Class B Investor Amount as a proportion of the Class B Investor Amount
as of the Closing Date, the Collateral Indebtedness Amount as a proportion of
the Collateral Indebtedness Amount as of the Closing Date or the Class D
Investor Amount as a proportion of the Class D Investor Amount as of the Closing
Date, respectively. On the Closing Date, the Class A Pool Factor, the Class B
Pool Factor, the Collateral Pool Factor and the Class D Pool Factor
(collectively, the "Pool Factors") will each be 1.0000000 and will remain
unchanged during the Revolving Period, except in certain limited circumstances.
Thereafter, on and after the beginning of the Rapid Amortization Period, the
Class A Pool Factor will decline to reflect reductions in the Class A Investor
Amount, and after the Class A Investor Amount has been reduced to zero, the
Class B Pool Factor will decline to reflect reductions in the Class B Investor
Amount. The Collateral Pool Factor will decline to reflect reductions in the
Collateral Indebtedness Amount. See "Description of the Series 1997-2
Certificates and the Pooling and Servicing Agreement -- Allocation of Investor
Default Amount; Adjustment Amounts; Investor Charge Offs."
Pursuant to the Pooling and Servicing Agreement, monthly reports concerning
the Investor Amount, the Adjusted Investor Amount, the Pool Factors and various
other items of information will be made available to the Certificateholders. In
addition, on or before January 31 of each year, beginning in 1998, information
for tax reporting purposes will be made available to Certificateholders. See
"Description of the Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Book-Entry Registration" and "-- Reports to Certificateholders."
DESCRIPTION OF THE SERIES 1997-2 CERTIFICATES
AND THE POOLING AND SERVICING AGREEMENT
The Series 1997-2 Certificates will be issued pursuant to the Pooling and
Servicing Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following is a
summary of the material provisions of the Pooling and Servicing Agreement and is
qualified in its entirety by reference to the Pooling and Servicing Agreement.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Pooling and Servicing Agreement.
37
<PAGE> 42
GENERAL
The Series 1997-2 Certificates will represent undivided interests in the
Trust, including an interest in floating percentages of all payments on the
Receivables in the Trust during the Revolving Period, a fixed percentage,
subject to monthly adjustment by the Servicer, of all payments in respect of
Principal Receivables during the Accumulation Period, a fixed percentage of all
payments in respect of Principal Receivables during the Rapid Amortization
Period, a floating percentage of payments in respect of Finance Charge
Receivables during the Revolving Period and the Accumulation Period, and a fixed
percentage of all payments in respect of Finance Charge Receivables during the
Rapid Amortization Period. Each Offered Certificate represents the right to
receive monthly payments of interest at one-twelfth ( 1/12th) of the applicable
Certificate Rate and payments of principal at the respective maturity dates or
during the Rapid Amortization Period funded from collections of Finance Charge
Receivables, Net Recoveries and Principal Receivables, respectively, allocated
to the Investor Amount. See "-- Investor Percentages and Transferor Percentage;"
"-- Applications of Collections" and "-- Allocation of Investor Default Amount;
Adjustment Amounts; Investor Charge Offs."
The Transferor will initially own the interest not represented by the
Series 1997-2 Certificates or other Series of certificates. The Transferor
Amount will be evidenced by the Exchangeable Transferor Certificate, which will
represent an undivided interest in the Trust, including the right to a floating
percentage (the "Transferor Percentage") of all payments on the Receivables in
the Trust. The Transferor will be permitted to assign any or all of its
interests in the Exchangeable Transferor Certificate to the Company or any of
its affiliates. The Exchangeable Transferor Certificate may be subdivided and a
portion thereof may be sold to third parties in the form of a separate Series.
The ability of the Transferor to issue other Series and to subdivide the
Exchangeable Transferor Certificate is subject to certain additional conditions,
including delivery to the Trustee of (i) an opinion of counsel that the issuance
of such new series will not have a material adverse effect on the federal income
tax characterization of any outstanding Series and (ii) written confirmation
from each Rating Agency rating each of the outstanding Series that the issuance
of such new Series will not result in such Rating Agency reducing or withdrawing
its rating on any certificates then outstanding. See "-- Investor Percentages
and Transferor Percentage" and " -- Issuance of New Series."
During the Revolving Period, the Investor Amount will remain constant
except in certain limited circumstances. The amount of Principal Receivables in
the Trust, however, will vary as new Principal Receivables are added to the
Trust and others are paid or removed. The Transferor Amount will fluctuate,
therefore, to reflect the changes in the amount of the Principal Receivables in
the Trust. During the Accumulation Period, all or a portion of the collections
of Principal Receivables allocable to the entire Investor Amount will be
deposited in the Principal Account until the relevant Expected Payment Date or
the commencement of the Rapid Amortization Period. During the Rapid Amortization
Period, the Investor Amount will decline as payments of Principal Receivables
allocated to the Investor Amount are collected and distributed monthly to the
Certificateholders on the applicable payment dates. As a result, the Transferor
Amount during the Accumulation Period or a Rapid Amortization Period may
generally increase relative to the Investor Amount to reflect the reductions in
the Investor Amount and will also change to reflect the variations in the amount
of Principal Receivables in the Trust or the amount held in the Excess Funding
Account. See "-- Allocation of Investor Default Amount; Adjustment Amounts;
Investor Charge Offs."
The assets of the Trust will consist of the Receivables, all monies due or
to become due in respect thereof (including all Finance Charge Receivables), all
collections, Recoveries and other proceeds of the Receivables and proceeds of
credit insurance policies, if any, relating to the Receivables, all rights to
security for any Receivables, all proceeds and products of all of the foregoing,
and all monies held in certain accounts of the Trust, including the Collection
Account, the Excess Funding Account, the Reserve Account and the Cash Collateral
Account. For purposes of this section, the term "Receivables" shall include all
the property and rights listed in the preceding sentence. In addition, the
Transferor will assign to the Trust the Transferor's rights relating to the
Receivables under the Receivables Purchase Agreements, pursuant to which the
Receivables transferred to the Trust by the Transferor have been and will be
purchased by the Transferor from each of the Sellers. See "Description of the
Receivables Purchase Agreements."
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The Offered Certificates will initially be represented by two or more
certificates, each registered in the name of a nominee of DTC. The Offered
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form. The Transferor has been
informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is expected
to be the holder of record of the Offered Certificates. No Certificate Owner
will be entitled to receive a certificate representing such person's interest in
the Offered Certificates, except as described under "-- Definitive
Certificates." Unless and until Definitive Certificates are issued under the
limited circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants and all references herein to distributions, notices, reports
and statements to Certificateholders shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the Offered
Certificates, as the case may be, for distribution to Certificate Owners in
accordance with DTC's procedures. See "-- Book-Entry Registration" and
"-- Definitive Certificates."
On the Closing Date, the Trustee will authenticate and deliver, upon the
order of the Transferor, two or more certificates representing the Offered
Certificates to DTC, and one or more certificates representing the Collateral
Indebtedness Interest to the Collateral Indebtedness Holder and one or more
certificates representing the Class D Certificates to the Transferor (or its
designee) against payment of the net purchase price for the Series 1997-2
Certificates. On the Closing Date, the Servicer will deliver to the Trustee a
certificate setting forth the aggregate amounts of the Principal Receivables and
Finance Charge Receivables as of the close of business on the day preceding the
Closing Date.
INTEREST PAYMENTS
Interest will accrue on the Offered Certificates from the Closing Date.
Beginning with the month following the month in which such accrual date occurs,
interest at one-twelfth of the Certificate Rate will be paid on the Distribution
Date in each month to the Certificateholders in whose names the Offered
Certificates were registered at the close of business on the Record Date.
Interest will be distributed on the , 1997 Distribution Date, and
on each Distribution Date thereafter. Interest due on any Distribution Date will
be calculated on the amount of the Investor Amount as of the preceding Record
Date (plus any prior interest deficiency) or, in the case of the initial
Distribution Date, on the amount of the Investor Amount on the Closing Date.
Interest will be prorated for the actual number of days in the first accrual
period. Interest will be calculated on the basis of a 360-day year comprised of
twelve 30-day months, with each accrual period constituting a single month.
Interest payments on any Distribution Date will be funded from Available Finance
Charge Collections.
PRINCIPAL PAYMENTS
During the Revolving Period, which begins on the Closing Date and ends on
the close of business on the last day of the Monthly Period preceding the
commencement of the Accumulation Period or, if earlier, the day the Rapid
Amortization Period begins, principal payments will be made to the holder of the
Exchangeable Transferor Certificate, allocated to other Series of certificates,
applied as Reallocated Principal Collections, if required, or deposited in the
Excess Funding Account rather than deposited to the Principal Account or paid to
the Certificateholders. Under certain circumstances, the commencement of the
Accumulation Period may be postponed by the Transferor. On or prior to the
Distribution Date occurring 12 months prior to the Class A Expected Payment
Date, the Transferor shall designate the number of Monthly Periods in the
Accumulation Period and the commencement date of the Accumulation Period. In the
absence of such a designation, this Accumulation Period will commence on
, .
During the Accumulation Period, a portion of Available Principal
Collections will be deposited in the Principal Account on each Distribution
Date. During the Rapid Amortization Period, which would begin upon the
occurrence of a Pay Out Event, any amounts held in the Principal Account will be
allocated first to the Class A Certificateholders, with the balance, if any, to
the Class B Certificateholders to the extent of their respective Investor
Amounts, and thereafter Available Principal Collections will be paid to the
Certificateholders on each Distribution Date. The Class A Investor Amount will
be equal to the Class A Initial Investor Amount minus the aggregate amount of
principal payments paid to the Class A Certificateholders and minus
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the amount of Class A Investor Charge Offs which have not been reimbursed, plus
the aggregate amount of reductions of the Series Adjustment Amounts allocable to
the Class A Certificates. The Class A Adjusted Investor Amount is equal to the
Class A Investor Amount minus the amount held in the Principal Account on behalf
of the Class A Certificateholders. The first principal payment will be made to
the Principal Account or to the Certificateholders, as the case may be,
beginning on the first Distribution Date following the month in which either the
Accumulation Period or the Rapid Amortization Period commences. If a Rapid
Amortization Period does not commence, principal payments will be funded from
the amounts on deposit in the Principal Account. The Class B Investor Amount
will be equal to the Class B Initial Investor Amount minus the aggregate amount
of principal payments paid to the Class B Certificateholders minus any Class B
Subordinated Principal Collections applied for the benefit of the Class A
Certificates minus the amount of the unreimbursed Class B Investor Charge Offs
and reallocations of the Class B Investor Amount to the Class A Investor Amount
to cover the Class A Required Amount and plus the aggregate amount of reductions
of the Series Adjustment Amounts allocable to the Class B Certificates. The
Class B Adjusted Investor Amount is equal to the Class B Investor Amount minus,
prior to the payment in full of the Class A Investor Amount, the excess of the
Principal Account Balance over the Class A Investor Amount, and after the
payment in full of the Class A Investor Amount, the Principal Account Balance,
if any (but not less than zero). On the Class A Expected Payment Date, amounts
on deposit in the Principal Account will be distributed to holders of the Class
A Certificates, and on the Class B Expected Payment Date, amounts on deposit in
the Principal Account will be distributed to holders of the Class B
Certificates; provided that the Rapid Amortization Period has not commenced.
During the Collateral Amortization Period, certain collections of Principal
Receivables will be distributed to the Collateral Indebtedness Holders. See
"-- Investor Percentages and Transferor Percentage;" "-- Applications of
Collections;" "-- Collateral Amortization Period" and "-- Pay Out Events".
POSTPONEMENT OF ACCUMULATION PERIOD
The Accumulation Period is scheduled to commence at the close of business
on the last day of the Monthly Period. Upon written notice to the
Trustee, the Transferor may elect to postpone the commencement of the
Accumulation Period and extend the length of the Revolving Period, subject to
certain conditions, including those set forth below. The Transferor may make
such election only if the Accumulation Period Length (determined as described
below) is less than 12 months. On each Determination Date, until the
Accumulation Period begins, the Servicer will determine the "Accumulation Period
Length," which is the number of months expected to be required to fund the
Principal Account up to the Class A Initial Investor Amount no later than the
Class A Expected Payment Date, based on (a) the monthly collections of Principal
Receivables expected to be distributable to the certificateholders of all Series
(excluding certain other Series), assuming a principal payment rate no greater
than the lowest monthly principal payment rate on the Receivables for the
preceding 12 months and (b) the amount of principal expected to be distributable
to certificateholders of all Series (excluding certain other Series) which are
not expected to be in their revolving periods during the Accumulation Period. If
the Accumulation Period Length is less than 12 months, the Transferor may, at
its option, postpone the commencement of the Accumulation Period such that the
number of months included in the Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Accumulation Period based on the
investor amounts of certain other Series which are scheduled to be in their
revolving periods during the Accumulation Period and on increases in the
principal payment rate occurring after the Closing Date. The length of the
Accumulation Period will never be less than one month nor greater than 12
months.
TRANSFER OF RECEIVABLES
The Transferor has transferred to the Trust all its right, title and
interest in and to all the Receivables in the Accounts as of July , 1997 (the
"Cut-Off Date"), and in and to all Receivables thereafter created in the
Accounts and thereafter acquired by the Transferor from the Sellers pursuant to
the Receivables Purchase Agreements. In addition to the occasional designation
of Additional Accounts (as discussed below), the Transferor has agreed that each
new credit card account originated by the Sellers after the Cut-Off Date and
purchased by the Transferor pursuant to the Receivables Purchase Agreements
shall automatically be included as an Account (and the Receivables arising
thereunder are automatically transferred to the Trust);
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provided that such new account satisfies certain eligibility requirements
("Automatic Additional Accounts"). The Transferor, at its option, may terminate
or suspend the automatic inclusion of such Automatic Additional Accounts at any
time. In the future, the property of the Trust may include credit card accounts
Receivables generated by, or acquired by, other subsidiaries or divisions of the
Company, including, without limitation, those resulting from acquisitions,
subject to the satisfaction of certain conditions. See "Description of the
Receivables Purchase Agreements."
In connection with the transfer of the Receivables to the Trust, the
Transferor will cause the Servicer to indicate or cause to be indicated in the
computer files of the Transferor and each Seller that the Receivables have been
sold and transferred to the Transferor and thereupon transferred by the
Transferor to the Trust. In addition, the Transferor will provide or cause to be
provided to the Trustee a computer file or a microfiche or written list
containing a true and complete list showing each Account, identified by account
number and by Receivable balance, as of the Cut-Off Date. The agreements
relating to the Accounts and the Receivables maintained by or on behalf of the
Transferor or the Servicer will not be segregated by or on behalf of the
Transferor or the Servicer from other agreements relating to other credit card
accounts and receivables and such agreements will not be stamped or marked to
reflect the transfer of the Receivables to the Trust, but the books and records,
including computer records, of the Receivables will be marked to evidence such
transfer. The Transferor will file financing statements under the UCC with
respect to the Receivables meeting the requirements of applicable state law. See
"Certain Legal Aspects of the Receivables."
Pursuant to the Pooling and Servicing Agreement, the Transferor may, and
under certain circumstances and subject to certain limitations and conditions
shall, designate from time to time Additional Accounts to be included as
Accounts pursuant to the Receivables Purchase Agreements, and all Receivables in
such Additional Accounts, whether such Receivables are then existing or
thereafter created. All Receivables so acquired by the Transferor will be
transferred by the Transferor to the Trust. The Transferor may also (under
certain circumstances and subject to certain limitations and conditions) remove
Accounts. See "-- Addition of Accounts" and "-- Removal of Accounts."
REPRESENTATIONS AND WARRANTIES
The Transferor will make certain representations and warranties to the
Trust to the effect that, among other things, (a) as of the Closing Date it is
duly incorporated, validly existing and in good standing and has the authority
to consummate the transactions contemplated by the Pooling and Servicing
Agreement and the Receivables Purchase Agreements and (b) as of the Cut-Off Date
(or as of the date of the addition of Additional Accounts) each Account was an
Eligible Account and no selection procedures adverse to the Certificateholders
have been employed by the Transferor in selecting the Accounts. If any of these
representations and warranties proves to have been incorrect in any material
respect when made, and (i) continues to be incorrect for 60 days after written
notice of such breach is received by the Transferor from the Trustee or by the
Transferor and the Trustee from holders of Series 1997-2 Certificates
representing not less than 50% of the Investor Amount, and (ii) as a result of
which the interests of the holders of Series 1997-2 Certificates are materially
and adversely affected and remain materially and adversely affected for such
period, then the Trustee, or the holders of Series 1997-2 Certificates
representing more than 50% of the Investor Amount, may declare that a Pay Out
Event has occurred, thereby commencing the Rapid Amortization Period. See
"-- Pay Out Events."
The Transferor will also make representations and warranties to the Trustee
for the benefit of certificateholders of each Series relating to the Receivables
to the effect, among other things, that (a) as of the Cut-Off Date or the
creation date, as applicable, and in the case of Receivables in Additional
Accounts, as of the related cut off date for any such Additional Accounts (the
"Additional Account Cut-Off Date"), each of the Receivables then existing is an
Eligible Receivable and (b) each Receivable transferred on such day has been
transferred free and clear of any liens, other than certain liens permitted by
the Pooling and Servicing Agreement, such as liens for taxes and governmental
charges not then due or which the Transferor is contesting in good faith, the
Transferor's interests in the Receivables as holder of the Exchangeable
Transferor Certificate and the Transferor's right to receive certain interest
and investment earnings under the Pooling and
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Servicing Agreement and various Series Supplements thereunder. In the event of a
breach of any representation and warranty set forth in this paragraph, and
where, as a result, any Receivable becomes a Receivable in a Defaulted Account
or the Trust's rights into or under such Receivable or its proceeds are
impaired, then, unless such breach is cured within 90 days or such longer period
agreed to by the Trustee (not to exceed an additional 90 days) of the earlier to
occur of the discovery of any such event by the Transferor or the Servicer or
the Transferor's or the Servicer's receipt of written notice of such breach from
the Trustee, the Transferor shall accept retransfer of such Receivable (each an
"Ineligible Receivable") on the terms and conditions set forth below; provided,
however, no such retransfer shall be required to be made with respect to such
Ineligible Receivable if, on any day within such 90-day period, the
representations and warranties with respect to such Ineligible Receivable shall
then be true and correct in all material respects as if such Ineligible
Receivable has been transferred to the Trust on such day and the related Account
is no longer a Defaulted Account and the Trust's rights with respect to such
Receivable are no longer materially impaired and the proceeds of such Receivable
are available to the Trust free and clear of all liens. Notwithstanding the
foregoing, in the event of a breach of the representation and warranty with
respect to each Receivable then existing having been conveyed to the Trust free
and clear of any lien of any person, corporation or other entity claiming
through or under the Transferor or its affiliates, other than certain tax liens
for taxes not then due or which the Transferor is contesting in good faith, the
Transferor's interest in the Receivables as holder of the Exchangeable
Transferor Certificate and the Transferor's right to receive certain interest
and investment earnings under the Pooling and Servicing Agreement and the Series
1997-2 Supplement and in material compliance with all requirements of law
applicable to the Transferor, the Transferor shall immediately repurchase and
the Trustee shall convey, without recourse, all of the Trustee's right, title
and interest in each such Ineligible Receivable. The Transferor shall accept
retransfer of each such Ineligible Receivable and there shall be deducted from
the aggregate amount of Principal Receivables used to calculate the Transferor
Amount the aggregate amount of each such Ineligible Receivable. If the exclusion
of an Ineligible Receivable from the calculation of the Transferor Amount would
reduce the Transferor Amount below the Minimum Transferor Amount (after giving
effect to the addition of any Principal Receivables to the Trust), the
Transferor will be obligated to make a deposit in the Excess Funding Account in
immediately available funds in an amount equal to the amount by which the
Minimum Transferor Amount exceeds the Transferor Amount or designate sufficient
Additional Accounts. Such deposit will be considered a repayment in full of the
Ineligible Receivable and will be allocated as a collection in respect of
Principal Receivables. The obligation of the Transferor to accept retransfer of
any Ineligible Receivable is the sole remedy respecting any breach of the
representations and warranties set forth in this paragraph with respect to such
Receivable available to Certificateholders or the Trustee on behalf of
Certificateholders.
The Transferor will also make representations and warranties to the Trustee
for the benefit of certificateholders of all Series to the effect, among other
things, that as of the Closing Date (a) the Pooling and Servicing Agreement
constitutes a legal, valid and binding obligation of the Transferor and (b) the
Pooling and Servicing Agreement constitutes a valid transfer to the Trust of all
right, title and interest of the Transferor in and to the Receivables, whether
then existing or thereafter created in the Accounts and acquired by the
Transferor pursuant to the Receivables Purchase Agreements and the proceeds
thereof (including amounts in any of the accounts established for the benefit of
the Certificateholders) or the grant to the Trust of a first priority perfected
security interest in such Receivables (except for certain liens permitted by the
Pooling and Servicing Agreement such as tax liens not then due or which the
Company or the Transferor is contesting in good faith) and the proceeds thereof,
which is effective as to each Receivable upon the transfer thereof to the Trust
or upon its creation, as the case may be. In the event (x) any of the
representations and warranties described in this paragraph is either not true
and correct or (y) a material amount of Receivables are Ineligible Receivables,
and in either case, such event has a material adverse effect on the interests of
certificateholders of all Series, either the Trustee or the holders of
certificates evidencing undivided interests in the Trust aggregating more than
50% of the aggregate investor amounts of all Series (the "Aggregate Investor
Amount"), by written notice to the Transferor (and to the Trustee and the
Servicer if given by the Certificateholders), may direct the Transferor to
accept transfer of all the Receivables within 90 days of such notice or within
such longer period as may be specified in such notice (not to exceed an
additional 90 days). The Transferor will be obligated to accept transfer of such
Receivables on a Distribution Date occurring
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within such applicable period. Such retransfer will not be required to be made,
however, if at any time during such applicable period the representations and
warranties shall then be true and correct in all material respects or there is
no longer a material amount of such Receivables which are not Eligible
Receivables. The price for such retransfer will be equal to the Aggregate
Investor Amount at the end of the business day preceding the Distribution Date
on which the retransfer is scheduled to be made less the amount, if any, held in
any principal account and the Excess Funding Account on such Transfer Date plus
an amount equal to all accrued but unpaid interest on all Series at the
applicable Certificate Rates through the end of the respective interest accrual
period(s) of such Series, plus any enhancement required to be paid pursuant to
any Supplement. The payment of the retransfer amount shall be made into the
Collection Account in immediately available funds, and will be considered a
prepayment in full of all such Receivables and will be paid to the
certificateholders, and the Enhancement Providers, if any. These obligations
will constitute the sole remedy respecting a breach of the representations and
warranties set forth in this paragraph or there being a material amount of
Receivables which are not Eligible Receivables available to the Trustee or the
Certificateholders.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of defects
or compliance with the Transferor's representations and warranties or for any
other purpose.
ADDITION OF ACCOUNTS
Subject to the conditions specified below, the Transferor may designate
from time to time Additional Accounts (which may be from any billing cycle and
which may be VISA, MasterCard or proprietary credit card accounts) to be
included as Accounts and transfer to the Trust all Receivables in such
Additional Accounts, whether such Receivables are then existing or thereafter
created. In addition, if as of the end of any Monthly Period, the Transferor
Amount (after giving effect to any amounts deposited in the Excess Funding
Account) is less than the Minimum Transferor Amount, or if, as of the end of any
Monthly Period, the aggregate Principal Receivables is less than the Minimum
Aggregate Principal Receivables, then the Transferor will, under the Receivables
Purchase Agreements, cause the Receivables of Additional Accounts to be included
as Accounts, and the Transferor will purchase Receivables in such Additional
Accounts under the Receivables Purchase Agreements and transfer such Receivables
to the Trust in a sufficient amount so that the Transferor Amount as of the end
of such Monthly Period would have equaled or exceeded the Minimum Transferor
Amount or the aggregate Principal Receivables would have equaled or exceeded the
Minimum Aggregate Principal Receivables. "Minimum Aggregate Principal
Receivables" means the sum of the numerators used to determine investor
percentages with respect to Principal Receivables for each Series outstanding
for such period.
The Transferor may designate Additional Accounts only upon satisfaction of
the following conditions: (i) the Transferor shall give the Trustee and the
Servicer at least five business days' notice of the proposed addition which
specifies the approximate amount of Receivables to be transferred, (ii) the
Transferor shall give the Trustee an executed transfer agreement together with a
list of such Additional Accounts, (iii) the Transferor shall represent and
warrant that each Additional Account was as of the date of selection an Eligible
Account, no selection procedures believed by the Transferor to be materially
adverse to the interests of any outstanding Series of Certificates were used in
selecting such Additional Accounts, and that as of the closing date of such
transfer, the Transferor is not nor will be made insolvent by the transfer of
Receivables in such Additional Accounts, (iv) the Transferor shall represent and
warrant that the transfer of such Additional Accounts constitutes a valid
transfer to the Trust of all right, title and interest of the Transferor in and
to the Receivables in such Additional Accounts, whether then existing or
thereafter created, and the proceeds thereof (including amounts in any of the
accounts established for the benefit of the Certificateholders) or the grant to
the Trust of a first priority perfected security interest in such Receivables
(except for certain liens permitted under the Pooling and Servicing Agreement)
and the proceeds thereof, which is effective as to each Receivable upon the
transfer thereof to the Trust, (v) the Transferor shall deliver an officer's
certificate confirming the items specified in clauses (ii), (iii) and (iv) in
this paragraph, (vi) with respect to the designation of certain Additional
Accounts, the Transferor shall deliver an opinion of counsel in respect of such
addition in the form specified in the Pooling and Servicing Agreement, (vii)
with respect to the
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designation of certain Additional Accounts, the Transferor shall notify each
Rating Agency of such proposed addition of Additional Accounts and such Rating
Agency shall have delivered to the Trustee a letter confirming that the Rating
Agency Condition shall have been satisfied and (viii) the Transferor records and
files financing statements with respect to the Receivables then existing and
thereafter created in the Additional Accounts for the transfer of accounts,
general intangibles and chattel paper meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
the transfer and assignment of the Receivables in Additional Accounts by the
Transferor to the Trust. The Transferor will deliver to the Trustee a computer
file, microfiche or written list of all such included Accounts.
Additional Accounts opened during the normal operation of each of the
Sellers' credit card account business shall be automatically added to the
Accounts as Automatic Additional Accounts on an ongoing basis; provided,
however, that such automatic inclusion and transfer shall not occur with respect
to any such account if: (i) such account does not qualify as an Eligible
Account, (ii) the inclusion in the Trust of the Receivables arising under such
account would exceed the Aggregate Automatic Addition Limit or (ii) the
Transferor otherwise designates such account as an account which is not to be
included as an Account. The Transferor will deliver to the Trustee a computer
file, microfiche or written list of all such included Accounts and record and
file all appropriate financing statements with respect to the Receivables in
such Automatic Additional Accounts. The Transferor, at its option may, by
providing written notice to the Trustee and the Sellers, terminate or suspend
the automatic inclusion of Automatic Additional Accounts at any time.
"Aggregate Automatic Addition Limit" means (i) the number of Eligible
Accounts designated as Automatic Additional Accounts, which either (x) with
respect to any period of three consecutive Monthly Periods commencing in
January, April, July or October of a calendar year equals 15% of the sum of the
number of Accounts as of the last business day preceding the commencement of
such period (or, the Cut-Off Date, whichever is later) and the number of
Additional Accounts included as Accounts since such business day or (y) with
respect to any period of 12 consecutive Monthly Periods, equals 20% of the sum
of the number of Accounts as of the last business day preceding the commencement
of such period (or, the Cut-Off Date, whichever is later) and the number of
Additional Accounts included as Accounts since such business day or (ii) such
higher number of Automatic Additional Accounts as to which Standard & Poor's and
Moody's or any other applicable Rating Agency rating any Certificates shall
consent to in writing.
REMOVAL OF ACCOUNTS
Subject to the conditions specified below, during the Revolving Period, the
Transferor may, at its option, remove from the Trust all Receivables from
certain Accounts which it designates (the "Removed Accounts") and accept
reconveyance of all Receivables in the Removed Accounts without notice to the
Certificateholders; provided, however, that the Transferor shall not make more
than one such designation in any Monthly Period. The Transferor shall give the
Trustee and the Servicer notice of such removal 10 business days prior to the
date on which the Accounts are to be reassigned to the Transferor. The
Transferor shall be permitted to designate and require retransfer to it of
Receivables from Removed Accounts only upon satisfaction of the following
conditions: (i) each Rating Agency shall have delivered a letter confirming that
the Rating Agency Condition has been satisfied, (ii) the Transferor shall have
delivered or caused to be delivered to the Trustee for execution a written
retransfer agreement and a computer file, microfiche or written list containing
a true and complete list of all Removed Accounts identified by account number
and Receivables balance in such Removed Accounts; (iii) the Transferor shall
represent and warrant that no selection procedures believed by the Transferor to
be materially adverse to the interests of the certificateholders of any
outstanding Series or any Enhancement Provider were used in selecting the
Removed Accounts; (iv) such removal shall not, in the reasonable belief of the
Transferor, cause the Transferor Amount to be less than the Minimum Transferor
Amount, and the aggregate amount of Principal Receivables in the Trust shall not
be less than the Minimum Aggregate Principal Receivables; (v) the removal of any
Receivables of any Removed Accounts shall not, in the reasonable belief of the
Transferor, result in a Pay Out Event; and (vi) the Transferor shall have
delivered to the Trustee an officer's certificate confirming the items set forth
in clauses (i) through (v) above.
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DISCOUNT OPTION RECEIVABLES
Pursuant to the Pooling and Servicing Agreement, the Transferor has
designated 2% (the "Discount Percentage") of the amount of Receivables arising
in the Accounts on and after the date of such designation that would otherwise
be treated as Principal Receivables to be treated as Finance Charge Receivables
(the "Discount Option Receivables"). The Transferor may, without notice to or
consent of the Series 1997-2 Certificateholders, from time to time, elect (the
"Discount Option") to increase, reduce or eliminate (subject to the limitation
described below) the Discount Percentage for Discount Option Receivables arising
in the Accounts on and after the date of such change or to apply the Discount
Percentage to Receivables created in Accounts not previously subject to the
Discount Percentage. The Transferor must provide 30 days' prior written notice
to the Servicer, the Trustee, each Rating Agency and, in limited circumstances,
holders of certificates that are not rated, of any such increase, reduction or
elimination, and such increase, reduction or elimination will become effective
on the date specified therein unless the Transferor reasonably believes that
such increase, reduction or elimination will at the time of its occurrence cause
a Pay Out Event, or an event which with notice or the lapse of time would
constitute a Pay Out Event, to occur with respect to any Series, including
Series 1997-2; provided that if such designation would cause the Discount
Percentage to be less than 1% or more than 3%, the Rating Agency Condition must
be satisfied and in limited circumstances, holders of outstanding certificates
that are not rated have consented to such action.
Discount Option Receivables shall be equal to, on any date of processing
(commencing with the Cut-Off Date), the sum of (a) the aggregate Discount Option
Receivables at the end of the prior date of processing plus (b) any new Discount
Option Receivables created on such date of processing minus (c) any Discount
Option Receivable Collections received on such date of processing. The Discount
Option Receivables created on any date of processing shall be the product of (i)
the amount of Principal Receivables created on such date of processing (without
giving effect to the deduction of the Discount Option Receivables) and (ii) the
Discount Percentage; provided, however, that the aggregate "Discount Option
Receivables" at the end of the date of processing preceding the Cut-Off Date
shall be deemed to be $ .
"Discount Option Receivable Collections" means, on any date of processing
on and after the date on which the Transferor's exercise of its Discount Option
is in effect, the product of (a) a fraction the numerator of which is the amount
of Discount Option Receivables and the denominator of which is the sum of the
Principal Receivables and the Discount Option Receivables, in each case at the
end of the prior Monthly Period, and (b) collections of Principal Receivables
(without giving effect to Discount Option Receivables) on such date of
processing.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
responsible for servicing and administering the Receivables in accordance with
the Servicer's policies and procedures in effect for servicing credit card
account receivables comparable to the Receivables, as such policies and
procedures may be modified from time to time by the Servicer. The Servicer has
designated its affiliate, McRae's, Inc., as the initial Subservicer.
COLLECTION AND RESERVE ACCOUNTS
The Servicer will establish and maintain, or cause to be established and
maintained, the Collection Account, which will be a segregated corporate trust
account, with the Trustee or another Qualified Institution, in the Trustee's
name and for the benefit of the holders of the certificates of all Series then
outstanding. The Servicer will also establish a "Principal Account" as a
segregated trust account established with a "Qualified Institution." A Qualified
Institution is defined generally as a (i) depository institution or trust
company, organized under the laws of the United States or any state thereof (or
any domestic branch or agency of any foreign bank), the deposits of which are
insured by the Federal Deposit Insurance Corporation, which at all times has a
rating of at least P-1 by Moody's Investors Service, Inc. ("Moody's") and of A-1
by Standard & Poor's Ratings Services ("Standard & Poor's", and together with
Moody's, the "Rating Agency") in the case of the certificates of deposit or
short-term unsecured debt, or a rating from the applicable Rating Agency of at
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least Aaa or AAA or the equivalent, as applicable, in the case of its long-term
unsecured debt obligations, or (ii) a depository institution, otherwise
acceptable to each Rating Agency rating any Series. Notwithstanding the
foregoing, any institution which shall have corporate trust powers and which
maintains the Collection Account, the Excess Funding Account, the Principal
Account or any other account maintained for the benefit of holders of
certificates of any Series as a fully segregated trust account with the trust
department of such institution shall not be required to meet the foregoing
rating requirements.
All payments to Certificateholders will be paid solely out of the amounts
in the Collection Account and Principal Account. Funds in the Collection Account
and Principal Account will be invested, at the direction of the Servicer, in
"Permitted Investments," which include (i) direct obligations of, and
obligations fully guaranteed by the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of depository institutions or
trust companies, incorporated under the laws of the United States of America or
any state thereof (including the District of Columbia, and any domestic branch
or agency of any foreign bank), and which is subject to supervision and
examination by federal or state banking or depository institution authorities;
provided, however, that the commercial paper, if any, and short-term unsecured
debt obligations of such depository institution or trust company shall have, at
the time of the Trust's investment or contractual commitment to invest therein,
a credit rating from the Rating Agency in the highest investment category
granted by such Rating Agency, (iii) commercial paper having, at the time of the
Trustee's investment or contracted commitment to invest therein, a rating in the
highest investment category granted by such Rating Agency, (iv) bankers'
acceptances issued by any depository institution or trust company described in
clause (ii) above, (v) money market funds which have the highest rating from, or
have otherwise been approved in writing by the Rating Agencies, (vi) time
deposits (having maturities of not more than 30 days) or notes which are payable
on demand by an entity the commercial paper of which has a rating of the highest
investment category granted by the Rating Agencies, (vii) certain repurchase
obligations involving Permitted Investment instruments so long as the
counterparty thereto has at the time of the Trust's investment therein, a
short-term debt rating of at least A-1 or P-1, or the equivalent from the
applicable Rating Agencies and (viii) any other investments approved in writing
by the applicable Rating Agencies prior to the Trust's investment therein. For
purposes of determining the availability of funds or balances in the Collection
Account, all investment earnings on such funds shall be deemed not to be
available or on deposit until actually credited to such account. The Servicer,
or the Subservicer on behalf of the Servicer, will have the revocable power to
withdraw funds from the Collection Account and to instruct the Trustee to make
withdrawals and payments from the Collection Account and the Principal Account
for the purpose of carrying out the Servicer's duties under the Pooling and
Servicing Agreement. The paying agent for the Series 1997-2 Certificates (the
"Paying Agent") will initially be the Trustee. The Paying Agent will have the
revocable power to withdraw funds from the Principal Account for the purpose of
making distributions to the Certificateholders.
The Servicer will establish and maintain, or cause to be established or
maintained, a "Reserve Account" with a Qualified Institution in the Trustee's
name as a segregated trust account and for the benefit of the holders of the
Certificates. As described in "-- Applications of Collections," after the
Reserve Account Funding Date but prior to the termination of the Reserve
Account, a portion of the amounts held in the Collection Account will be applied
to fund the Reserve Account. During the Accumulation Period, the Trustee will
withdraw an amount equal to the lesser of the amount held in the Reserve Account
and the difference between (a) the product of amounts held in the Principal
Account and the interest rates applicable to the Offered Certificates and (b)
investment income on the Principal Account, and deposit such amount in the
Collection Account. Amounts on deposit in the Reserve Account in excess of the
amounts required to be maintained therein from time to time will be distributed
to the Transferor.
The "Reserve Account Funding Date" will be the Distribution Date with
respect to the Monthly Period which commences three months prior to the
commencement of the Class A Accumulation Period (or earlier, under certain
circumstances relating to the yield on the Receivables).
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CASH COLLATERAL ACCOUNT
The Cash Collateral Account will be a segregated trust account with a
Qualified Institution which will be held for the benefit of the Class A
Certificateholders, the Class B Certificateholders, the Collateral Indebtedness
Interest Holder and the Class D Certificateholders, as their interests appear in
the Series 1997-2 Supplement, and in the case of the Collateral Indebtedness
Holder, in the loan agreement among the Trustee, the Transferor, the Servicer
and the Collateral Indebtedness Holder (the "Loan Agreement") (which interest,
in the case of the Collateral Indebtedness Holder, will be subordinated to the
interests of the Class A Certificateholders and Class B Certificateholders as
provided in the Series 1997-2 Supplement). The purpose of the Loan Agreement is
to govern the terms and conditions of the purchase of the Collateral
Indebtedness Interest by the Collateral Indebtedness Holder. Funds held in the
Cash Collateral Account will be invested in Permitted Investments. On each
Distribution Date, all interest and earnings (net of losses and investment
expenses) received during the preceding Monthly Period on funds in the Cash
Collateral Account will be allocable to the Excess Spread.
The balance of the Cash Collateral Account (i.e., the "Available Cash
Collateral Amount") initially will be zero and will increase thereafter (i) to
the extent the Transferor elects to deposit Excess Spread and Shared Excess
Finance Charge Collections therein and (ii) to the extent Excess Spread and
Shared Excess Finance Charge Collections allocable to Series 1997-2 are required
to be deposited therein pursuant to the Loan Agreement.
On each Distribution Date, one or more withdrawals may be made from the
Cash Collateral Account in an amount up to the amount therein to fund, in order
of priority, the Class A Required Amount, the Class B Required Amount and the
Collateral Required Amount.
On each Distribution Date, if the Available Enhancement Amount is less than
the Required Enhancement Amount, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 (to the extent available as
described below under "-- Applications of Collections" and "-- Shared Excess
Finance Charge Collections") to increase the Available Enhancement Amount to the
extent of such shortfall.
At the Servicer's option, on each Distribution Date, if the Cash
Enhancement Surplus, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account and all payments of principal to Series 1997-2
Certificateholders with respect to such Distribution Date, is greater than zero,
the Servicer or the Trustee, acting pursuant to the Servicer's instructions,
will withdraw from the Cash Collateral Account, and pay to the Transferor, an
amount equal to such Cash Enhancement Surplus.
"Cash Enhancement Surplus" means, as of any Determination Date, the lesser
of (a) the Enhancement Surplus and (b) the excess of the amount held in and
available to be withdrawn from the Cash Collateral Account over the Required
Cash Collateral Amount.
"Enhancement Surplus" means, with respect to any Distribution Date, the sum
of the amount held in and available to be withdrawn from the Cash Collateral
Account, the Collateral Indebtedness Amount and the Class D Investor Amount,
over the Required Enhancement Amount.
EXCESS FUNDING ACCOUNT
On any Business Day that the Transferor Amount does not equal or exceed the
Minimum Transferor Amount after giving effect to any addition of Principal
Receivables to the Trust (the "Shortfall Amount"), the Servicer shall not
distribute to the holder of the Exchangeable Transferor Certificate any
collections of Principal Receivables that otherwise would be distributed to the
holder of the Exchangeable Transferor Certificate, but shall deposit such funds
equal to the Shortfall Amount, in a segregated trust account (which may be a
sub-account of the Collection Account) established and maintained by the
Servicer in the name of the Trustee, in trust for the benefit of the holders of
certificates of all Series outstanding entitled to the benefits of such Excess
Funding Account, with a Qualified Institution and designating clearly that the
funds deposited therein are held for the benefit of such holders of certificates
of all Series outstanding (the "Excess Funding Account"). Funds held in the
Excess Funding Account will be withdrawn and paid to the holder of the
Exchangeable Transferor Certificate on any date to the extent the Transferor
Amount exceeds the Minimum
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Transferor Amount on such date; provided, however, that if an Accumulation
Period or Rapid Amortization Period commences with respect to any Series in a
Group entitled to the benefits of Shared Principal Collections, the Servicer
shall determine the aggregate amount of Principal Shortfalls, if any, with
respect to each such Series that is entitled to receive Shared Principal
Collections, and the Servicer shall instruct the Trustee to withdraw such amount
up to the amount of any funds held in the Excess Funding Account and allocate
such amount among each Series as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of such Series.
Funds in the Excess Funding Account shall be invested by the Trustee, at
the direction of the Servicer, in Permitted Investments. Any interest and other
investment earnings (net of losses and investment expenses), if any, on amounts
held in the Excess Funding Account during any Monthly Period will be withdrawn
from the Excess Funding Account and treated as collections of Finance Charge
Receivables with respect to such Monthly Period.
SUBORDINATION OF THE CLASS B CERTIFICATES, THE COLLATERAL INDEBTEDNESS INTEREST
AND THE CLASS D CERTIFICATES
The Class B Certificates, the Collateral Indebtedness Interest and the
Class D Certificates will be subordinated to the extent necessary to fund
certain payments with respect to the Class A Certificates. In addition, the
Collateral Indebtedness Interest and the Class D Certificates will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain collections of Principal Receivables otherwise
allocable to the Class B Certificateholders ("Class B Subordinated Principal
Collections") may be reallocated to the Class A Certificateholders and the Class
B Investor Amount may be reduced. Similarly, certain collections of Principal
Receivables allocable to the Class D Certificates and the Collateral
Indebtedness Interest may be reallocated to the Class A Certificateholders and
the Class B Certificateholders, and the Class D Investor Amount and the
Collateral Indebtedness Amount may be reduced as a result. To the extent the
Class B Investor Amount is reduced, the percentage of collections of Finance
Charge Receivables allocated to the Class B Certificateholders in subsequent
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Investor Amount is not reimbursed, the amount of
principal distributable to the Class B Certificateholders will be reduced. See
"-- Investor Percentages and Transferor Percentage," "-- Reallocation of Cash
Flows," and "-- Applications of Collections" herein.
INVESTOR PERCENTAGES AND TRANSFEROR PERCENTAGE
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
between the Investor Amount, other Series or certificates outstanding and the
Transferor Amount, all amounts collected on Finance Charge Receivables and
Principal Receivables. The Servicer will make each allocation by reference to
the applicable investor percentage and the transferor percentage in each case.
The Pooling and Servicing Agreement provides that the Servicer may estimate the
amounts of Principal Receivables and Finance Charge Receivables and the amount
of collections allocable to the Accounts. If the Servicer is able to determine
the actual amount of collections proceeds which are collections of Finance
Charge Receivables and collections of Principal Receivables, the Servicer may at
its option allocate collections in accordance with such actual amounts. All
estimates of collections of Finance Charge Receivables will be binding for all
purposes on the Certificateholders, the Trustee and the Transferor.
The Investor Percentage (the "Investor Percentage") will be calculated as
follows:
Principal Receivables during Revolving Period, Finance Charge
Receivables (other than during the Rapid Amortization Period) and Allocable
Amounts. With respect to (A) Principal Receivables during any Monthly
Period during the Revolving Period, (B) Finance Charge Receivables during
any Monthly Period other than during a Rapid Amortization Period, and (C)
the Allocable Amounts during any Monthly Period, the percentage equivalent
of a fraction the numerator of which is equal to the Adjusted Investor
Amount as of the last day of the immediately preceding Monthly Period (or
the Initial Investor Amount, in the case of the first Monthly Period
applicable to Series 1997-2) and the denominator of which is the greater of
(i) the sum of the aggregate Principal Receivables in the Trust and the
Excess
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Funding Amount, in each case at the close of business on the last day of
the immediately preceding Monthly Period and (ii) the sum of the numerators
used to calculate the applicable investor percentages with respect to
Principal Receivables, Finance Charge Receivables or the Allocable Amounts,
as applicable, for all Series outstanding as of the date on which such
determination is being made.
Finance Charge Receivables during the Rapid Amortization Period. With
respect to Finance Charge Receivables (and any other amounts treated as
Finance Charge Receivables) during any Monthly Period during a Rapid
Amortization Period, the percentage equivalent of a fraction the numerator
of which is equal to the Adjusted Investor Amount as of the last day of the
Revolving Period and the denominator of which is the greater of (i) the sum
of the aggregate Principal Receivables in the Trust and the Excess Funding
Amount, in each case at the close of business on the last day of the
immediately preceding Monthly Period and (ii) the sum of the numerators
used to calculate the investor percentages with respect to Finance Charge
Receivables for all Series outstanding as of the date on which such
determination is being made.
Principal Receivables during the Accumulation Period and the Rapid
Amortization Period. With respect to Principal Receivables during any
Monthly Period during the Accumulation Period or the Rapid Amortization
Period, the percentage equivalent of a fraction the numerator of which is
equal to the Adjusted Investor Amount as of the last day of the Revolving
Period and the denominator of which is the greater of (i) the sum of the
aggregate Principal Receivables in the Trust and the Excess Funding Amount,
in each case at the close of business on the last day of the immediately
preceding Monthly Period and (ii) the sum of the numerators used to
calculate the investor percentages with respect to Principal Receivables
for all Series outstanding as of the date on which such determination in
being made; provided, however, that during an Accumulation Period, (A) the
Investor Percentage of Principal Receivables may be reset by and at the
option of the Transferor in connection with the issuance of a new Series
(and any such reset Investor Percentage with respect to Principal
Receivables will also apply in any Rapid Amortization Period following the
Accumulation Period) for each Monthly Period to a fixed percentage, which
shall not be greater than the fraction described above and shall not be
less than the greater of (i) a fraction, (I) the numerator of which shall
be the Adjusted Investor Amount on the last day of the preceding Monthly
Period, and (II) the denominator of which shall be the greater of (x) the
sum of Principal Receivables and the Excess Funding Amount as of the end of
such day and (y) the sum of the numerators used to calculate the investor
percentages with respect to Principal Receivables for all Series
outstanding as of such date of determination, and (ii) a fraction that when
multiplied by the amount of collections allocable to Principal Receivables
for the preceding Monthly Period will equal 110% of the sum of the
Controlled Accumulation Amount for such preceding Monthly Period, and (B)
if the Series 1997-2 Certificates are paired with a Paired Series and a
Rapid Amortization Period commences for such Paired Series, the Transferor
may, by written notice to the Trustee and Servicer, designate a different
numerator to be used to determine such percentage.
As used herein, the following terms have the meanings indicated:
"Class A Investor Amount" means, on any date of determination, an amount
equal to (a) the Class A Initial Investor Amount, minus (b) the aggregate amount
of principal payments made to the Class A Certificateholders prior to such date,
minus (c) the excess, if any, of the aggregate amount of Class A Investor Charge
Offs for all prior Distribution Dates over the sum of the aggregate amount of
reimbursed Class A Investor Charge Offs and, without duplication, reductions of
the Series Adjustment Amount allocable to the Class A Certificates; provided,
however, that the Class A Investor Amount may not be reduced below zero.
"Class A Adjusted Investor Amount" means, on any date of determination
while the Class A Certificates are outstanding, an amount equal to the Class A
Investor Amount minus the amount, if any, of funds held in the Principal Account
(the "Principal Account Balance") (but not less than zero).
"Class A Investor Percentage" shall be calculated by substituting the Class
A Adjusted Investor Amount and the Class A Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
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"Class B Investor Amount" means, on any date of determination, an amount
equal to (a) the Class B Initial Investor Amount, minus (b) the aggregate amount
of principal payments made to the Class B Certificateholders prior to such date,
minus (c) the aggregate amount of Class B Investor Charge Offs for all prior
Distribution Dates, minus (d) the amount of Class B Subordinated Principal
Collections used to make payments in respect of the Class A Certificates on all
prior Distribution Dates, minus (e) an amount equal to the amount by which the
Class B Investor Amount has been reduced on all prior Distribution Dates in
respect of the Class A Allocable Amount, plus (f) the sum of the amount of
Excess Spread and Shared Excess Finance Charge Collections allocated and
available on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (c), (d) and (e) and, without
duplication, reductions of the Series Adjustment Amount allocable to the Class B
Certificates; provided, however, that the Class B Investor Amount may not be
reduced below zero.
"Class B Adjusted Investor Amount" shall mean, on any date of
determination, an amount equal to the Class B Investor Amount minus, prior to
the payment in full of the Class A Investor Amount, the excess of the Principal
Account Balance over the Class A Investor Amount, and after the payment in full
of the Class A Investor Amount, the Principal Account Balance, if any (but not
less than zero).
"Class B Investor Percentage" shall be calculated by substituting the Class
B Adjusted Investor Amount and the Class B Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount
respectively, in the definition of Investor Percentage.
"Collateral Indebtedness Amount" means, on any date of determination, an
amount equal to (a) the initial Collateral Indebtedness Amount equal to
$ , minus (b) the aggregate amount of principal payments made to the
Collateral Indebtedness Holder on or prior to such date, minus (c) the amount of
Collateral Subordinated Principal Collections used to make payments in respect
of the Certificates on all prior Distribution Dates that have resulted in a
reduction of the Collateral Indebtedness Amount, minus (d) an amount equal to
the amount by which the Collateral Indebtedness Amount has been reduced on all
prior Distribution Dates in respect of the Class A Allocable Amount, the Class B
Allocable Amount and the Collateral Allocable Amount, plus (e) the sum of the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available on all prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c) and (d) and, without
duplication, reductions of the Series Adjustment Amount allocable to the
Collateral Indebtedness Interest; provided, however, that the Collateral
Indebtedness Amount may not be reduced below zero.
"Collateral Investor Percentage" shall be calculated by substituting the
Collateral Indebtedness Amount and the Collateral Initial Indebtedness Amount in
all references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class D Investor Amount" means, on any date of determination, an amount
equal to (a) the initial Class D Investor Amount equal to $ (plus the
initial principal amount of any additional Class D Certificates issued during
the Revolving Period, at the sole option of the Transferor), minus (b) the
aggregate amount of principal payments made to the Class D Certificateholders
prior to such date, minus (c) the amount of Class D Subordinated Principal
Collections used to make payments in respect of the Certificates and the
Collateral Indebtedness Interest on all prior Distribution Dates, minus (d) an
amount equal to the amount by which the Class D Investor Amount has been reduced
on all prior Distribution Dates in respect of the Class A Allocable Amount, the
Class B Allocable Amount, the Collateral Allocable Amount and the Class D
Allocable Amount, plus (e) the sum of the amount of Excess Spread and Shared
Excess Finance Charge Collections allocated and available on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c) and (d) and, without duplication, reductions of the
Series Adjustment Amount allocable to the Class D Certificates; provided,
however, that the Class D Investor Amount may not be reduced below zero.
"Adjusted Investor Amount" shall mean, as of any date of determination, an
amount equal to the sum of the Class A Adjusted Investor Amount, the Class B
Adjusted Investor Amount, the Collateral Indebtedness Amount and the Class D
Investor Amount, in each case as of such date.
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"Class D Investor Percentage" shall be calculated by substituting the Class
D Investor Amount and the Class D Initial Investor Amount in all references to
the Adjusted Investor Amount and the Initial Investor Amount, respectively, in
the definition of Investor Percentage.
"Class D Subordinated Principal Collections" means, with respect to any
Monthly Period, an amount equal to the product of (i) the applicable Class D
Investor Percentage with respect to collections of Principal Receivables and
(ii) the aggregate amount of collections of Principal Receivables for such
Monthly Period.
"Collateral Subordinated Principal Collections" means, with respect to any
Monthly Period, an amount equal to the product of (i) the applicable Collateral
Investor Percentage with respect to collections of Principal Receivables and
(ii) the aggregate amount of collections of Principal Receivables for such
Monthly Period.
The Transferor Percentage will be equal to 100% minus the sum of the
investor percentages for all Series outstanding.
As described above, during the Revolving Period, the Investor Percentage
applied when allocating collections on Principal Receivables is expected to vary
from month to month because the Investor Amount as a percentage of the total
amount of Principal Receivables in the Trust will fluctuate from day to day.
During the Accumulation Period, the Investor Percentage will be fixed as of the
last day of the Revolving Period but can be reset as of the end of each month at
the Servicer's option to a fraction which shall not be greater than the Investor
Percentage that would otherwise be in effect in the absence of such a reset.
During the Rapid Amortization Period, the amount of collections on Principal
Receivables allocated to the Investor Amount each day will be determined by
reference to a fixed percentage which will be equal to the Investor Percentage
with respect to Principal Receivables on the last day of the Revolving Period,
subject to any permitted reset of the Investor Percentage during the
Accumulation Period.
REALLOCATION OF CASH FLOWS
On each Determination Date, the Servicer will determine the amount (the
"Class A Required Amount"), if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest for the following
Distribution Date and any Class A Additional Interest previously due but not
paid to the Class A Certificateholders on a prior Distribution Date, (iv) the
Class A Allocable Amount, if any, for such Distribution Date and (v) if
Proffitt's, Inc. is no longer the Servicer, the Class A Servicing Fee for the
related Distribution Date and any unpaid Class A Servicing Fee for a prior
Distribution Date exceeds (b) the Class A Available Funds for the preceding
Monthly Period. If the Class A Required Amount is greater than zero, Excess
Spread and Shared Excess Finance Charge Collections allocable to Series 1997-2
and available for such purpose will be used to fund the Class A Required Amount
with respect to such Distribution Date. If such Excess Spread and Shared Excess
Finance Charge Collections available with respect to such Distribution Date are
insufficient to fund the Class A Required Amount, amounts, if any, held in the
Cash Collateral Account will then be used to fund the remaining Class A Required
Amount. If such Excess Spread and Shared Excess Finance Charge Collections and
amounts, if any, held in the Cash Collateral Account are insufficient to fund
the Class A Required Amount, collections of Principal Receivables allocable
first to the Class D Certificates, then to the Collateral Indebtedness Interest
and then to the Class B Certificates for the related Monthly Period
("Reallocated Principal Collections") will then be used to fund the remaining
Class A Required Amount. If such Reallocated Principal Collections with respect
to the related Monthly Period are insufficient to fund the remaining Class A
Required Amount, then the Class A Investor Amount, Class B Investor Amount, the
Collateral Indebtedness Amount and the Class D Investor Amount may be reduced.
See "-- Allocation of Investor Default Amount; Adjustment Amount; Investor
Charge Offs".
On each Determination Date, the Servicer will determine the amount (the
"Class B Required Amount"), if any, equal to the sum of (a) the amount, if any,
by which the sum of (i) Class B Monthly Interest for the following Distribution
Date, (ii) any Class B Monthly Interest previously due but not paid to the Class
B Certificateholders on a prior Distribution Date, (iii) any Class B Additional
Interest for the
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following Distribution Date and any Class B Additional Interest previously due
but not paid to the Class B Certificateholders on a prior Distribution Date and
(iv) if Proffitt's, Inc. is no longer the Servicer, the Class B Servicing Fee
for the related Distribution Date and any unpaid Class B Servicing Fee for a
prior Distribution Date exceeds the Class B Available Funds for the preceding
Monthly Period and (b) the amount, if any, by which the Class B Allocable
Amount, if any, for such Distribution Date exceeds the amount of Excess Spread
and Shared Excess Finance Charge Collections allocable to Series 1997-2
available on such Distribution Date as specified in clause (d) under
"-- Application of Collections -- Excess Spread; Shared Excess Finance Charge
Collections." If the Class B Required Amount is greater than zero, Excess Spread
and Shared Excess Finance Charge Collections allocable to Series 1997-2 not
required to fund the Class A Required Amount or reimburse Class A Investor
Charge Offs will be used to fund the Class B Required Amount with respect to
such Distribution Date. If such Excess Spread and Shared Excess Finance Charge
Collections available with respect to such Distribution Date are insufficient to
fund the Class B Required Amount, amounts, if any, held in the Cash Collateral
Account not required to fund the Class A Required Amount will then be used to
fund the remaining Class B Required Amount. If such Excess Spread and Shared
Excess Finance Charge Collections and amounts, if any, available in the Cash
Collateral Account are insufficient to fund the Class B Required Amount,
Reallocated Principal Collections allocable first to the Class D Certificates
and then to the Collateral Indebtedness Interest not required to fund the Class
A Required Amount will then be used to fund the remaining Class B Required
Amount. If such Reallocated Principal Collections with respect to the related
Monthly Period are insufficient to fund the remaining Class B Required Amount,
then the Class B Investor Amount, Collateral Indebtedness Amount and the Class D
Investor Amount may be reduced. See "-- Allocation of Investor Default Amount;
Adjustment Amounts; Investor Charge Offs".
On each Determination Date, the Servicer will determine the amount (the
"Collateral Required Amount"), if any, equal to the sum of (a) the amount, if
any by which the sum of (i) Collateral Monthly Interest for the following
Distribution Date, (ii) any Collateral Monthly Interest previously due but not
paid to the Collateral Indebtedness Holder on a prior Distribution Date, (iii)
any Collateral Additional Interest for such Distribution Date and any Collateral
Additional Interest previously due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date and (iv) if Proffitt's, Inc. is no longer
the Servicer, the Collateral Servicing Fee for such Distribution Date and any
unpaid Collateral Servicing Fee for a prior Distribution Date exceeds the
Collateral Available Funds and Excess Spread and Shared Excess Finance Charge
Collections with respect to the preceding Monthly Period available to make
payments with respect thereto and (b) the amount, if any, by which the
Collateral Allocable Amount, if any, for such Distribution Date exceeds the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1997-2 available on such Distribution Date as specified in clause (h)
under "-- Applications of Collections -- Excess Spread; Shared Excess Finance
Charge Collections." If the Collateral Required Amount is greater than zero,
amounts, if any, held in the Cash Collateral Account not required to fund the
Class A Required Amount or the Class B Required Amount or pay certain other
amounts will then be used to fund the remaining Collateral Required Amount. If
such Excess Spread and Shared Excess Finance Charge Collections and amounts, if
any, available in the Cash Collateral Account are insufficient to fund the
Collateral Required Amount, Reallocated Principal Collections allocable to the
Class D Certificates and not required to fund the Class A Required Amount or the
Class B Required Amount and other than Class B Subordinated Principal
Collections or Collateral Subordinated Principal Collections will then be used
to fund the remaining Collateral Required Amount. If such Reallocated Principal
Collections with respect to the related Monthly Period are insufficient to fund
the remaining Collateral Required Amount, then the Collateral Indebtedness
Amount and the Class D Investor Amount may be reduced. See "-- Allocation of
Investor Default Amount; Adjustment Amounts; Investor Charge Offs."
APPLICATIONS OF COLLECTIONS
Deposit of Collections into Collection Account
Except as otherwise provided below, the Servicer is required to deposit
collections of Principal Receivables and Finance Charge Receivables into the
Collection Account no later than the second Business Day following the date of
processing such collections. Collections shall not be required to be invested in
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Permitted Investments until such time as they are deposited into the Collection
Account. As long as the Company or an affiliate of the Company shall be the
Servicer and no Pay Out Event relating to a Servicer Default shall have occurred
and be continuing, and either (i) the Company or such affiliate shall maintain a
short-term debt or certificate of deposit rating (which may be an implied
rating) of P-1 by Moody's and of A-1+ by Standard & Poor's, or (ii) the Company
shall obtain a written notification from each Rating Agency to the effect that
such Rating Agency does not intend to downgrade or withdraw its then current
rating of any outstanding Series despite the Servicer's inability to satisfy the
rating requirement specified in clause (i), and for two Business Days following
any reduction of either such rating or failure to satisfy the conditions of
clause (ii), the Servicer may make a single deposit in the Collection Account in
immediately available funds on the Business Day prior to each Distribution Date
in an amount equal to the collections with respect to the Monthly Period
preceding such Distribution Date to the extent such amounts and collections are
allocated to Series 1997-2 as described herein under "-- Applications of
Collections -- Allocations."
During the Revolving Period and the Accumulation Period, collections of
Finance Charge Receivables allocable to Series 1997-2 with respect to each
Monthly Period are not required to be deposited into the Collection Account on a
daily basis after an amount equal to Monthly Interest for the related
Distribution Date plus, if the Company is no longer the Servicer, the Investor
Monthly Servicing Fee for the related Distribution Date, has been deposited into
the Collection Account. During the Revolving Period, so long as the Available
Enhancement Amount is not less than the Required Enhancement Amount, collections
of Principal Receivables allocable to Series 1997-2 with respect to each Monthly
Period are not required to be deposited into the Collection Account on a daily
basis during such Monthly Period; provided, however, that in the event that the
Minimum Transferor Amount exceeds the Transferor Amount on any date, such
collections of Principal Receivables shall be deposited into the Excess Funding
Account until the Transferor Amount equals the Minimum Transferor Amount. During
the Accumulation Period, after an amount of collections of Principal Receivables
allocable to Series 1997-2 equal to the Controlled Deposit Amount with respect
to each Monthly Period has been deposited into the Collection Account, and so
long as the Available Enhancement Amount is not less than the Required
Enhancement Amount, collections of Principal Receivables allocable to Series
1997-2 with respect to each Monthly Period need not be deposited into the
Collection Account on a daily basis during such Monthly Period; provided,
however, that in the event that the Minimum Transferor Amount exceeds the
Transferor Amount on any date, such collections of Principal Receivables shall
be deposited into the Excess Funding Account until the Transferor Amount equals
the Minimum Transferor Amount.
As long as Proffitt's, Inc. or one of its affiliates is the Servicer and no
Servicer Default has occurred and is continuing, the Servicer may make deposits
into the Collection Account and the Excess Funding Account on any date net of
amounts payable to the Transferor or the Servicer from such accounts on such
date.
Allocations
The Servicer will allocate among Series 1997-2, the interests of all other
Series issued and outstanding, and the Transferor Interest, all collections of
Finance Charge Receivables and Principal Receivables and all Allocable Amounts
with respect to each Monthly Period. Collections of Finance Charge Receivables
with respect to any Monthly Period will be allocated to Series 1997-2 based on
the Investor Percentage applicable to Finance Charge Receivables for such
Monthly Period.
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Payment of Interest, Fees and Other Items
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply the Class A Available Funds, Class B Available Funds,
Collateral Available Funds and Class D Available Funds as follows:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to the Monthly Period immediately preceding
such Distribution Date will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to Class A Certificateholders on a
prior Distribution Date at a rate equal to the Class A Certificate Rate
plus 2% per annum ("Class A Additional Interest"), will be distributed
to the Class A Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class A Servicing Fee for such Distribution Date, plus the amount
of any Class A Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the
Servicer;
(iii) an amount equal to the Class A Allocable Amount, if any, for
such Distribution Date will be treated as a portion of Available
Principal Collections for such Distribution Date as described under
"-- Payments of Principal"; and
(iv) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections".
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to Class B Certificateholders on a
prior Distribution Date at a rate equal to the Class B Certificate Rate
plus 2% per annum ("Class B Additional Interest"), will be distributed
to the Class B Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class B Servicing Fee for such Distribution Date, plus the amount
of any Class B Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the
Servicer; and
(iii) the balance, if any, will constitute Excess Spread and will
be allocated and distributed as described under "-- Excess Spread;
Shared Excess Finance Charge Collections".
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Collateral Servicing Fee for such Distribution Date, plus the
amount of any Collateral Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections".
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(D) On each Distribution Date, an amount equal to the Class D
Available Funds with respect to such Distribution Date will be distributed
in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an amount equal
to the Class D Servicing Fee for such Distribution Date, plus the amount
of any Class D Servicing Fee previously due but not distributed to the
Servicer on a prior Distribution Date, will be distributed to the
Servicer; and
(ii) the balance, if any, will constitute Excess Spread and will be
allocated and distributed as described under "-- Excess Spread; Shared
Excess Finance Charge Collections".
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (i) the Class A Investor Percentage of collections of
Finance Charge Receivables with respect to such Monthly Period plus any other
amounts that are to be treated as collections of Finance Charge Receivables,
(ii) if such Monthly Period immediately precedes a Distribution Date that occurs
prior to the Class B Principal Commencement Date, the earnings (net of losses
and investment expenses) if any, earned on the Principal Account with respect to
such Monthly Period, (iii) the amount, if any, to be withdrawn from the Reserve
Account and included in Class A Available Funds pursuant to the Series 1997-2
Supplement with respect to such Distribution Date and (iv) the amount, if any,
of investment earnings (net of losses and investment expenses), if any, on
amounts held in the Reserve Account required to be included in Class A Available
Funds pursuant to the Series 1997-2 Supplement with respect to such Distribution
Date.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth ( 1/12th) of the product of (i) the Class A
Certificate Rate and (ii) the outstanding principal amount of the Class A
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date).
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (i) the Class B Investor Percentage of collections of
Finance Charge Receivables with respect to such Monthly Period plus any other
amounts that are to be treated as collections of Finance Charge Receivables,
(ii) if such Monthly Period immediately precedes a Distribution Date that occurs
on or after the Class B Principal Commencement Date, the earnings (net of losses
and investment expenses) if any, earned on the Principal Account with respect to
such Monthly Period, (iii) the amount, if any, to be withdrawn from the Reserve
Account and included in Class B Available Funds pursuant to the Series 1997-2
Supplement with respect to such Distribution Date and (iv) the amount, if any,
of investment earnings (net of losses and investment expenses), if any, on
amounts in the Reserve Account required to be included in Class B Available
Funds pursuant to the Series 1997-2 Supplement with respect to such Distribution
Date.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth ( 1/12th) of the product of (i) the Class B
Certificate Rate and (ii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date).
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Investor Percentage of the collections of Finance
Charge Receivables with respect to such Monthly Period and any other amounts
that are to be treated as collections of Finance Charge Receivables.
"Class D Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class D Investor Percentage of the collections of Finance
Charge Receivables with respect to such Monthly Period and any other amounts
that are to be treated as collections of Finance Charge Receivables.
"Available Principal Collections" means, with respect to any Distribution
Date, an amount equal to (a) the applicable Investor Percentage of collections
of Principal Receivables for the related Monthly Period, plus (b) amounts
designated as Available Principal Collections as described under "Applications
of Collections -- Excess Spread; Shared Excess Finance Charge Collections",
minus (c) any applied Reallocated Principal Collections for the related Monthly
Period, plus (d) Shared Principal Collections allocated to Series 1997-2.
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"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clauses (A)(iv), (B)(iii), (C)(ii)
and (D)(ii) above plus investment earnings (net of losses and investment
expenses), if any, on amounts held in the Cash Collateral Account received
during the preceding Monthly Period.
"Class D Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class D Certificate Rate for the related
interest accrual period, (ii) the outstanding principal amount of the Class D
Certificates as of the preceding Record Date (or, in the case of the first
Distribution Date, as of the Closing Date) and (iii) a fraction, the numerator
of which is the actual number of days in the related Interest Period and the
denominator of which is 360.
"Class D Certificate Rate" means a rate equal to LIBOR plus 1.00% per
annum, or a lesser rate.
"Collateral Monthly Interest" means, with respect to any Distribution Date,
an amount equal to the product of (i) the Collateral Rate for the related
Interest Period, (ii) the outstanding principal amount of the Collateral
Indebtedness Interest as of the preceding Record Date (or, in the case of the
first Distribution Date, as of the Closing Date) and (iii) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360.
"Collateral Rate" means a rate equal to LIBOR plus 1.00% per annum, or such
lesser rate that is designated pursuant to the Loan Agreement.
Excess Spread; Shared Excess Finance Charge Collections
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the related Monthly
Period to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Distribution Date will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under "-- Payment of
Interest, Fees and Other Items," in that order of priority;
(b) an amount equal to the aggregate amount of Class A Investor Charge
Offs which have not been previously reimbursed will be treated as a portion
of Available Principal Collections for such Distribution Date as described
under "-- Payments of Principal;"
(c) an amount up to the Class B Required Amount, if any, with respect
to such Distribution Date will be used to fund any deficiency pursuant to
clauses (B)(i) and (ii) above under "-- Payment of Interest, Fees and Other
Items," in that order of priority;
(d) an amount equal to any remaining portion of the Class B Required
Amount for such Distribution Date will be treated as a portion of Available
Principal Collections for such Distribution Date as described under
"-- Payments of Principal;"
(e) an amount equal to unreimbursed reductions of the Class B Investor
Amount, if any, due to: (i) Class B Investor Charge Offs; (ii) allocations
of Reallocated Principal Collections for the benefit of the Class A
Certificates on all prior Distribution Dates that have resulted in a
reduction of the Class B Investor Amount; or (iii) reallocations of the
Class B Investor Amount to the Class A Investor Amount as a result of
unreimbursed Class A Allocable Amounts will each be treated as a portion of
Available Principal Collections for such Distribution Date as described
under "-- Payments of Principal;"
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of Collateral Monthly Interest
previously due but not paid to the Collateral Indebtedness Holder on a
prior Distribution Date, plus any additional interest with respect to
interest amounts that were due but not paid to the Collateral Indebtedness
Holder on a prior Distribution Date at a rate equal to the Collateral Rate
plus 2% per annum ("Collateral Additional Interest") will be distributed to
the Collateral Indebtedness Holder;
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(g) an amount equal to the Class A Servicing Fee, the Class B
Servicing Fee and the Collateral Servicing Fee for such Distribution Date
(or, if Proffitt's, Inc. is no longer the Servicer, the portion thereof
remaining unpaid) plus the amount of any Class A Servicing Fee, Class B
Servicing Fee or Collateral Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments of
Principal;"
(i) an amount equal to the unreimbursed reductions of the Collateral
Indebtedness Amount, if any, due to: (i) Collateral Indebtedness Charge
Offs; (ii) Reallocated Principal Collections used to make payments in
respect of the Certificates on all prior Distribution Dates that have
resulted in a reduction of the Collateral Indebtedness Amount and (iii)
reallocations of the Collateral Indebtedness Amount to the Class A Investor
or the Class B Investor Amount as a result of unreimbursed Class A
Allocable Amounts or unreimbursed Class B Allocable Amounts, respectively,
will be treated as a portion of Available Principal Collections for such
Distribution Date as described under "-- Payments of Principal;"
(j) an amount equal to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
effect to any deposit made on such date under the Pooling and Servicing
Agreement) will be deposited into the Cash Collateral Account;
(k) an amount equal to Class D Monthly Interest for such Distribution
Date, plus the amount of Class D Monthly Interest previously due but not
paid to the Class D Certificateholders on a prior Distribution Date, plus
any additional interest with respect to interest amounts that were due but
not paid to the Class D Certificateholders on a prior Distribution Date at
a rate equal to the Class D Certificate Rate plus 2% per annum ("Class D
Additional Interest") will be distributed to the Class D
Certificateholders;
(l) an amount equal to the Class D Servicing Fee for such Distribution
Date (or, if Proffitt's, Inc. is no longer the Servicer, the portion of the
Class D Servicing Fee for such Distribution Date remaining unpaid), plus
the amount of any Class D Servicing Fee previously due but not distributed
to the Servicer on a prior Distribution Date, will be distributed to the
Servicer;
(m) an amount equal to the Class D Allocable Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date as described under "-- Payments of
Principal;"
(n) an amount equal to unreimbursed reductions of the Class D Investor
Amount, if any, due to: (i) Class D Investor Charge Offs; (ii) allocations
of Reallocated Principal Collections that have resulted in the reduction of
Class D Investor Amount and (iii) reallocations of the Class D Investor
Amount to the Class A Investor Amount, the Class B Investor Amount or the
Collateral Indebtedness Amount as a result of unreimbursed Class A
Allocable Amounts, unreimbursed Class B Allocable Amounts or unreimbursed
Collateral Allocable Amounts, respectively, will be treated as a portion of
Available Principal Collections for such Distribution Date as described
under "-- Payments of Principal;"
(o) an amount equal to the aggregate of any other amounts (generally
indemnities and costs of reimbursements) then due to the Collateral
Indebtedness Holder pursuant to the Loan Agreement will be applied in
accordance with the Loan Agreement;
(p) an amount equal to the excess, if any, of the Required Reserve
Account Amount over the amount held in the Reserve Account will be
deposited into the Reserve Account; and
(q) the balance, if any, will constitute "Shared Excess Finance Charge
Collections" with respect to Group One to be applied with respect to other
Series in Group One.
"Required Cash Collateral Account" means the amount specified as such in
the Loan Agreement or such higher amount designated by the Transferor.
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Collateral Amortization Period
During the period beginning on the earlier of (i) payment in full of the
Class B Investor Amount and (ii) any date selected by the Servicer if the
Available Enhancement Amount as of the end of the prior Monthly Period exceeds
the Required Enhancement Amount as of the end of the prior Monthly Period, and
ending upon the earlier of (a) the payment in full of the Collateral
Indebtedness Amount, (b) the reduction of the Collateral Indebtedness Amount to
an amount whereby the Available Enhancement Amount is equal to the Required
Enhancement Amount if the Collateral Amortization Period arises pursuant to
clause (ii) above, (c) the onset of the Rapid Amortization Period, if the Class
A Investor Amount and Class B Investor Amount have not been paid in full or (d)
the Series 1997-2 Termination Date (the "Collateral Amortization Period"),
certain collections of Principal Receivables allocated to the Investor Amount
will be distributed monthly, subject to the limitations described below, to the
holders of the Collateral Indebtedness Interest on each Distribution Date
beginning with the first Distribution Date with respect to the Collateral
Amortization Period. A Collateral Amortization Period may occur more than once
prior to the payment in full of the Class B Investor Amount if the Collateral
Amortization Period arises as described in clause (ii) above.
The amount of collections of Principal Receivables to be distributed to the
Collateral Indebtedness Holder on any Distribution Date during the Collateral
Amortization Period (the "Enhancement Distribution Amount") will be calculated
as follows:
(A) in order to reduce the Available Enhancement Amount to the
Required Enhancement Amount as of the related Determination Date and
provided that a Pay Out Event has not occurred while Class A Certificates
and Class B Certificates remain outstanding, the Enhancement Distribution
Amount shall be equal to the lesser of (x) collections of Principal
Receivables allocated to the Investor Amount during the preceding Monthly
Period (after any allocations to meet any Class A Certificate or Class B
Certificate principal amortization obligations and after any reallocations
required to pay the Class A Required Amount and/or the Class B Required
Amount) and (y) the amount necessary to reduce the Available Enhancement
Amount as of the end of the prior Monthly Period to the Required
Enhancement Amount as of the end of the prior Monthly Period;
(B) after the Class B Investor Amount is paid in full, the Enhancement
Distribution Amount shall be equal to the collections of Principal
Receivables allocated to the Investor Amount during the preceding Monthly
Period; and
(C) upon the occurrence of a Pay Out Event, the Enhancement
Distribution Amount shall equal zero until the Class B Investor Amount is
paid in full, after which time the Enhancement Distribution Amount will be
calculated as described in clause (B) above.
Payments of Principal
On each Distribution Date, the Trustee, acting pursuant to the Servicer's
instructions, will distribute Available Principal Collections in the following
priority:
(A) On each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections, less any portion thereof
allocated at the option of the Transferor as part of Collateral Monthly
Principal or Class D Monthly Principal to make a payment with respect to
the Collateral Indebtedness Interest or the Class D Investor Amount
(subject to maintaining the Required Enhancement Amount and subject to any
other restrictions specified in the Loan Agreement), will be treated as
Shared Principal Collections with respect to other Series and applied as
described under "-- Shared Principal Collections"; and
(B) On each Distribution Date with respect to the Accumulation Period
or the Rapid Amortization Period, all such Available Principal Collections
will be deposited or distributed in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date will, during the Class A Accumulation Period, be
deposited in the Principal Account for payment to the Class A
Certificateholders on the earlier to occur of the Class A Expected
Payment Date and the first
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Distribution Date with respect to the Rapid Amortization Period or,
during the Rapid Amortization Period, be distributed to the Class A
Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date will, during the Class B Accumulation Period, be
deposited in the Principal Account for payment to the Class B
Certificateholders on the earlier to occur of the Class B Expected
Payment Date and the first Distribution Date with respect to the Rapid
Amortization Period or, during the Rapid Amortization Period, be
distributed to Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for such
Distribution Date will be applied in accordance with the Loan Agreement;
(iv) an amount equal to Class D Monthly Principal for such
Distribution Date will be distributed to the Class D Certificateholders;
and
(v) the balance, if any, will be treated as Shared Principal
Collections with respect to other Series in Group One and applied as
described under "-- Shared Principal Collections".
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period or the Rapid Amortization Period will equal the least
of (i) the Available Principal Collections held in the Collection Account with
respect to such Distribution Date, (ii) for each Distribution Date with respect
to the Accumulation Period prior to the Class A Expected Payment Date, the
Controlled Deposit Amount for such Distribution Date, and (iii) the Class A
Adjusted Investor Amount on such Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date relating
to the Accumulation Period or the Rapid Amortization Period, after the Class A
Certificates have been paid in full, will equal the least of (i) the Available
Principal Collections held in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Principal Collections
applied to any Class A Monthly Principal on such Distribution Date), (ii) for
each Distribution Date with respect to the Accumulation Period prior to the
Class B Expected Payment Date, the Controlled Deposit Amount for such
Distribution Date, and (iii) the Class B Adjusted Investor Amount on such
Distribution Date.
"Collateral Monthly Principal" with respect to any Distribution Date prior
to the payment in full of the Class B Certificates will equal the lesser of (i)
the Available Principal Collections held in the Collection Account with respect
to such Distribution Date (minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal or Class B Monthly
Principal on such Distribution Date) and (ii) the Enhancement Surplus on such
Distribution Date (after giving effect to any increase in the amount held in the
Cash Collateral Account or increase in the Class D Investor Amount on such
Distribution Date), provided that the Transferor shall have elected to pay such
Collateral Monthly Principal, and with respect to each Distribution Date
beginning with the Distribution Date on which the Class B Certificates have been
paid in full, the lesser of (x) the Available Principal Collections on deposit
in the Collection Account with respect to such Distribution Date (minus the
amount of such Available Principal Collections applied to any Class A Monthly
Principal or Class B Monthly Principal on such Distribution Date) and (y) the
Collateral Indebtedness Amount on such Distribution Date.
"Class D Monthly Principal" with respect to any Distribution Date after the
Collateral Indebtedness Interest has been paid in full, or prior thereto subject
to the requirements of the Loan Agreement (and provided that such distribution
would not require the Transferor to designate a Minimum Transferor Interest
Percentage pursuant to the Series 1997-2 Supplement), will equal the least of
(i) the Available Principal Collections held in the Collection Account with
respect to such Distribution Date (minus the portion of such Available Principal
Collections applied to any Class A Monthly Principal, Class B Monthly Principal
or Collateral Monthly Principal on such Distribution Date), (ii) the Enhancement
Surplus on such Distribution Date and (iii) the Class D Investor Amount on such
Distribution Date.
"Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Class A Accumulation Period, $ ; provided, however, if
the Accumulation Period Length is determined to be less than 12 months, the
Controlled Accumulation Amount with respect to the Class A Certificates shall be
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equal to (i) the product of (x) the Class A Initial Investor Amount and (y) the
Accumulation Period Factor for such Monthly Period divided by (ii) the Required
Accumulation Factor Number and (b) for any Distribution Date with respect to the
Class B Accumulation Period, $ .
"Accumulation Period Factor" means, for each Monthly Period, a fraction,
the numerator of which is equal to the sum of the initial investor amounts of
all outstanding Series, and the denominator of which is equal to the sum of (a)
the Initial Investor Amount (plus the aggregate initial principal amount of any
additional Class D Certificates), (b) the initial investor amounts (or other
applicable amounts) of all outstanding Series (other than Series 1997-2) which
are not expected to be in their revolving periods during such Monthly Period and
(c) the initial investor amounts (or other applicable amounts) of all other
outstanding Series which are not allocating Shared Principal Collections to
other Series and are expected to be in their revolving periods during such
Monthly Period.
"Required Accumulation Factor Number" is a fraction, rounded upwards to the
nearest whole number, the numerator of which is one and the denominator of which
is equal to the lowest monthly principal payment rate on the Accounts for the 12
months preceding the date of such calculation (or any lower monthly principal
payment rate selected by the Servicer at its option in its sole discretion),
expressed as a decimal.
"Controlled Deposit Amount" means, for any Distribution Date with respect
to the Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date.
"Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation Amount for such Distribution Date over the amount deposited into
the Principal Account as Class A Monthly Principal or Class B Monthly Principal,
as the case may be, for such Distribution Date, and (b) on each subsequent
Distribution Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled Deposit
Amount for such subsequent Distribution Date over the amount deposited into the
Principal Account as Class A Monthly Principal or Class B Monthly Principal, as
the case may be, for such subsequent Distribution Date.
"Available Enhancement Amount" means, with respect to any Distribution
Date, the sum of the amount on deposit in the Cash Collateral Account (after
giving effect to deposits or withdrawals from the Cash Collateral Account on
such Distribution Date), the Collateral Indebtedness Amount and the Class D
Investor Amount. The Available Enhancement Amount may be reduced on any
Distribution Date to the extent the Available Enhancement Amount as of the
preceding Determination Date exceeds the Required Enhancement Amount, provided
that a Pay Out Event has not occurred. Such reduction of the Available
Enhancement Amount may be effected via either a reduction of the Available Cash
Collateral Amount or the Collateral Indebtedness Amount or the Class D Investor
Amount.
"Required Enhancement Amount" means, with respect to any Distribution Date,
an amount equal to the product of the Adjusted Investor Amount (after giving
effect to all reductions thereof to be made on such Distribution Date) and
%, but not less than $ ; provided, however, that (i) if a Pay Out
Event occurs, then the Required Enhancement Amount shall equal the Required
Enhancement Amount on the Distribution Date immediately preceding such Pay Out
Event, (ii) in no event shall the Required Enhancement Amount exceed the sum of
the Class A Adjusted Investor Amount and the Class B Adjusted Investor Amount on
such date and (iii) the Required Enhancement Amount may be reduced without the
consent of the Series 1997-2 Certificateholders if (x) the Transferor shall have
received written notice from each Rating Agency that such reduction will not
result in the reduction or withdrawal of the then current rating of the Offered
Certificates, (y) the Transferor shall have delivered to the Trustee an
officer's certificate to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Transferor, such reduction
will not cause a Pay Out Event, or an event that, after the giving of notice or
the lapse of time, would constitute a Pay Out Event, to occur with respect to
Series 1997-2 and (z) the Transferor shall have delivered an opinion of counsel,
addressed to the Trustee, to the effect that such reduction will not (a)
adversely affect the tax characterization as debt of certificates of any
outstanding Series or Class with respect to which an opinion of counsel was
delivered at the time of their issuance that such certificates would
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be characterized as debt, (b) cause the Trust to be classified, for Federal
income tax purposes, as an association (or publicly traded partnership) taxable
as a corporation and (c) cause or constitute an event in which gain or loss
would be recognized by any Certificateholder.
EXAMPLE OF DISTRIBUTIONS
The following is an example of the application of the foregoing provisions
to the first Monthly Period during which the Offered Certificates will be
outstanding:
<TABLE>
<S> <C>
August 1 - August 31..................... Monthly Period
August 31................................ Record Date
September 10............................. Determination Date
September 12............................. Transfer Date
September 15............................. Distribution Date
</TABLE>
All payments collected at any time with respect to a Monthly Period will be
deposited in the Collection Account, and will then be allocated and paid or
deposited in accordance with the provisions of the Pooling and Servicing
Agreement. Distributions of interest will be made on the Distribution Date to
Certificateholders of record at the close of business on the Record Date.
"Determination Date" with respect to any Monthly Period will be a business day
occurring in the first ten days of the succeeding calendar month as selected
from time to time by the Servicer. The "Transfer Date" will be the business day
immediately preceding each Distribution Date. On the Determination Date, the
Servicer will instruct the Trustee regarding amounts to be withdrawn from the
Collection Account on the Distribution Date. On the Transfer Date, the Servicer
shall deposit to the Collection Account the amount of collections required to be
deposited therein, if daily deposits of collections are not required. See
" -- Book-Entry Registration" and " -- Definitive Certificates."
PAIRED SERIES
The 1997-2 Certificates may be paired with one or more other Series (such
other Series, a "Paired Series"). Such Paired Series either will be prefunded
with an initial deposit to a prefunding account in an amount up to the initial
principal balance of such Paired Series and primarily from the proceeds of the
sale of such Paired Series or will have a variable principal amount. Any such
prefunding account will be held for the benefit of such Paired Series and not
for the benefit of the holders of the 1997-2 Certificates. As funds are
accumulated in the Principal Account, either (i) in the case of a prefunded
Paired Series, an equal amount of funds on deposit in any prefunding account for
such prefunded Paired Series will be released (which funds will be distributed
to the Transferor) or (ii) in the case of a Paired Series having a variable
principal amount, an interest in such variable Paired Series in an equal or
lesser amount may be sold by the Trust (and the proceeds thereof will be
distributed to the Transferor) and, in either case, the investor amount in the
Trust of such Paired Series will increase by up to a corresponding amount. Upon
payment in full of the 1997-2 Certificates, assuming that there have been no
unreimbursed charge offs with respect to any related Paired Series, the
aggregate investor amount of such related Paired Series will have been increased
by an amount up to an aggregate amount equal to the Investor Amount on the
Closing Date. The issuance of a Paired Series will be subject to the conditions
described above under "-- General." There can be no assurance, however, that the
terms of any Paired Series might not affect the timing or amount of payments
received by the holders of the Offered Certificates. In particular, the
numerator used to determine the Investor Percentage applicable to collections
with respect to Principal Receivables in Series 1997-2 would be reduced upon the
commencement of a Rapid Amortization Period with respect to a Paired Series. In
such case, the time over which principal will be received by holders of the
Offered Certificates will be extended. See "Risk Factors -- Issuance of
Additional Series; Master Trust Considerations" and "Maturity Assumptions."
ALLOCATION OF INVESTOR DEFAULT AMOUNT; ADJUSTMENT AMOUNTS; INVESTOR CHARGE OFFS
"Defaulted Receivables" for any Monthly Period are Principal Receivables in
Accounts which were charged off as uncollectible in such Monthly Period
("Defaulted Accounts"). Receivables in an Account will be considered charged off
for the purposes of the Pooling and Servicing Agreement on the date on which
such
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Account is charged off in accordance with the usual and customary servicing
procedures of the Servicer, but in any event no later than 30 days after receipt
of notice by the Servicer that the related obligor has died or has become the
subject of a bankruptcy petition. The default amount (the "Default Amount") for
any Monthly Period will be an amount (not less than zero) equal to (a) the
amount of the Principal Receivables that were charged off in such Monthly Period
less (b) the amount of Recoveries received by the Servicer with respect to
Defaulted Accounts during such Monthly Period.
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Investor
Percentage applicable to Allocable Amounts with respect to such Monthly Period
and (ii) the Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class A Certificateholders (the "Class A
Investor Default Amount") on each Distribution Date in an amount equal to the
product of (i) the Class A Investor Percentage applicable during the related
Monthly Period and (ii) the Default Amount for such Monthly Period. A portion of
the Investor Default Amount will be allocated to the Class B Certificateholders
(the "Class B Investor Default Amount") on each Distribution Date in an amount
equal to the product of (i) the Class B Investor Percentage applicable during
the related Monthly Period and (ii) the Default Amount for such Monthly Period.
A portion of the Investor Default Amount will be allocated to the Collateral
Indebtedness Holder (the "Collateral Default Amount") on each Distribution Date
in an amount equal to the product of (i) the Collateral Investor Percentage
applicable during the related Monthly Period and (ii) the Default Amount for
such Monthly Period. A portion of the Investor Default Amount will be allocated
to the Class D Certificateholders (the "Class D Investor Default Amount") on
each Distribution Date in an amount equal to the product of (i) the Class D
Investor Percentage applicable during the related Monthly Period and (ii) the
Default Amount of such Monthly Period.
On each Determination Date, the Servicer will also calculate the Series
Adjustment Amount, as described below under "-- Allocation of Adjustment
Amounts." A portion of the Series Adjustment Amount will be allocated to the
Class A Certificateholders (the "Class A Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class A
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period. A portion of the Series Adjustment Amount will be allocated to
the Class B Certificateholders (the "Class B Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class B
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period. A portion of the Series Adjustment Amount will be allocated to
the Collateral Indebtedness Holder (the "Collateral Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Collateral
Indebtedness Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period. A portion of the Series Adjustment Amount will be allocated to
the Class D Certificateholders (the "Class D Adjustment Amount") on each
Distribution Date in an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class D
Investor Amount and the denominator of which is the Adjusted Investor Amount,
each as of the last day of the Monthly Period preceding the related Monthly
Period.
The sum of the Class A Investor Default Amount and the Class A Adjustment
Amount with respect to a Distribution Date is referred to as the "Class A
Allocable Amount." The sum of the Class B Investor Default Amount and the Class
B Adjustment Amount with respect to a Distribution Date is referred to as the
"Class B Allocable Amount." The sum of the Collateral Default Amount and the
Collateral Adjustment Amount with respect to a Distribution Date is referred to
as the "Collateral Allocable Amount." The sum of the Class D Investor Default
Amount and the Class D Adjustment Amount with respect to a Distribution
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Date is referred to as the "Class D Allocable Amount." The sum of the Class A
Allocable Amount, the Class B Allocable Amount, the Collateral Allocable Amount
and the Class D Allocable Amount equals the "Allocable Amount."
An amount equal to the Class A Allocable Amount for each Monthly Period
will be funded with Class A Available Funds, Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2, amounts, if any, held in
the Cash Collateral Account and Reallocated Principal Collections applied as
described above in "-- Applications of Collections -- Payment of Interest, Fees
and Other Items" and "-- Reallocation of Cash Flows." An amount equal to the
Class B Allocable Amount for each Monthly Period will be funded with Class B
Available Funds, Excess Spread and Shared Excess Finance Charge Collections
allocable to Series 1997-2, amounts, if any, held in the Cash Collateral Account
and Reallocated Principal Collections applied as described above in
"-- Applications of Collections -- Payment of Interest, Fees and Other Items"
and "-- Reallocation of Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2, amounts, if any, in the Cash
Collateral Account and Reallocated Principal Collections, then the Class D
Investor Amount will be reduced by the amount of such excess, but not by more
than the excess of the Class A Allocable Amount for such Distribution Date over
the amount of Excess Spread and Shared Excess Finance Charge Collections, the
amount withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections used to fund the Class A Allocable Amount for such
Distribution Date. In the event that such reduction would cause the Class D
Investor Amount to be a negative number, the Class D Investor Amount will be
reduced to zero, and the Collateral Indebtedness Amount will be reduced by the
amount by which the Class D Investor Amount would have been reduced below zero,
but not by more than the excess, if any, of the Class A Allocable Amount for
such Distribution Date over the amount of such reduction, if any, of the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class A Allocable Amount for such Distribution Date. In the
event that such reduction would cause the Collateral Indebtedness Amount to be a
negative number, the Collateral Indebtedness Amount will be reduced to zero and
the Class B Investor Amount will be reduced by the amount by which the
Collateral Indebtedness Amount would have been reduced below zero, but not by
more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Collateral Indebtedness Amount and the Class D Investor Amount with respect to
such Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class B Investor Amount to be a negative number, the Class B
Investor Amount will be reduced to zero, and the Class A Investor Amount will be
reduced by the amount by which the Class B Investor Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class A
Allocable Amount for such Distribution Date over the aggregate amount of the
reductions, if any, of the Class D Investor Amount, the Collateral Indebtedness
Amount and the Class B Investor Amount for such Distribution Date and the amount
of Excess Spread and Shared Excess Finance Charge Collections, the amount
withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections used to fund the Class A Investor Allocable Amount for
such Distribution Date (a "Class A Investor Charge Off"), which will have the
effect of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A Investor Amount has been reduced by the
amount of any Class A Investor Charge Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class A
Investor Charge Offs) by the amount of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 and available for such purpose as
described above in "-- Applications of Collections -- Excess Spread; Shared
Excess Finance Charge Collections". In addition, to the extent that such
reduction is due to the allocation of Series Adjustment Amounts, such reduction
may be reimbursed as a result of deposits in the Excess Funding Account,
increases in the amount of Principal Receivables in the Trust or certain
decreases in the aggregate Investor Amount of the Trust.
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On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Shared Excess Finance
Charge Collections allocable to Series 1997-2 not required to pay the Class A
Required Amount or reimburse Class A Investor Charge Offs, amounts, if any, in
the Cash Collateral Account not required to pay the Class A Required Amount and
Reallocated Principal Collections (exclusive of the portion of Reallocated
Principal Collections arising from the Class B Investor Amount's allocation of
collections of Principal Receivables) not required to pay the Class A Required
Amount, then the Class D Investor Amount will be reduced by the amount of such
excess, but not by more than the excess of the Class B Allocable Amount for such
Distribution Date over the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class B
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class D Investor Amount to be a negative number, the Class D
Investor Amount remaining after any reduction for the benefit of the Class A
Certificates will be reduced to zero, and the Collateral Indebtedness Amount
remaining after any reduction for the benefit of the Class A Certificates will
be reduced by the amount by which the Class D Investor Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class B
Allocable Amount for such Distribution Date over the amount of the reductions,
if any, of the Class D Investor Amount with respect to such Distribution Date
and the amount of Excess Spread and Shared Excess Finance Charge Collections,
the amount withdrawn from the Cash Collateral Account and the amount of
Reallocated Principal Collections used to fund the Class B Allocable Amount for
such Distribution Date. In the event that such reduction would cause the
Collateral Indebtedness Amount to be a negative number, the Collateral
Indebtedness Amount will be reduced to zero, and the Class B Investor Amount
will be reduced by the amount by which the Collateral Indebtedness Amount would
have been reduced below zero, but not by more than the excess, if any, of the
Class B Allocable Amount for such Distribution Date over the aggregate amount of
the reductions, if any, of the Collateral Indebtedness Amount and the Class D
Investor Amount with respect to such Distribution Date and the amount of Excess
Spread and Shared Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account and the amount of Reallocated Principal Collections
used to fund the Class B Allocable Amount for such Distribution Date (a "Class B
Investor Charge Off"), which will have the effect of slowing or reducing the
return of principal to the Class B Certificateholders. If the Class B Investor
Amount has been reduced by the amount of any Class B Investor Charge Offs, it
will thereafter be increased on any Distribution Date (but not by an amount in
excess of the aggregate Class B Investor Charge Offs) by the amount of Excess
Spread and Shared Excess Finance Charge Collections allocable to Series 1997-2
and available for such purpose as described above in "-- Applications of
Collections -- Excess Spread; Shared Excess Finance Charge Collections." In
addition, to the extent that such reduction is due to the allocation of Series
Adjustment Amounts, such reduction may be reimbursed as a result of deposits in
the Excess Funding Account, increases in the amount of Principal Receivables in
the Trust or certain decreases in the aggregate Investor Amount of the Trust.
On each Distribution Date, if the Collateral Required Amount for such
Distribution Date exceeds the amounts, if any, in the Cash Collateral Account
not required to pay the Class A Required Amount or the Class B Required Amount
or to pay certain other amounts and Reallocated Principal Collections (exclusive
of the portion of Reallocated Principal Collections arising from the Class B
Certificates' or the Collateral Indebtedness Amount's allocation of collections
of Principal Receivables) not required to pay the Class A Required Amount or the
Class B Required Amount, then the Class D Investor Amount remaining after any
reduction for the benefit of the Class A Certificates or the Class B
Certificates will be reduced by the amount of such excess, but not by more than
the Collateral Allocable Amount for such Distribution Date. In the event that
such reduction would cause the Class D Investor Amount to be a negative number,
the Class D Investor Amount will be reduced to zero, and the Collateral
Indebtedness Amount will be reduced by the amount by which the Class D Investor
Amount would have been reduced below zero (a "Collateral Indebtedness Charge
Off").
On each Distribution Date, if the Class D Allocable Amount exceeds the
amount of Excess Spread and Shared Excess Finance Charge Collections allocable
to Series 1997-2 available on such Distribution Date as specified in clause (m)
under "-- Applications of Collections -- Excess Spread; Shared Excess Finance
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Charge Collections" above, then the Class D Investor Amount will be reduced by
the amount of such excess (a "Class D Investor Charge Off").
ALLOCATION OF ADJUSTMENT AMOUNTS
The "Minimum Transferor Interest Percentage" shall be equal to the highest
Minimum Transferor Interest Percentage designated for any Series outstanding.
The Minimum Transferor Interest Percentage applicable to Series 1997-2 will
initially be zero; provided, however, that (a) the Transferor may, at its option
and in its sole discretion, designate a higher percentage as the Minimum
Transferor Interest Percentage so long as, after giving effect to such
designation and any repurchase of Certificates or designation of Additional
Accounts, the Transferor Amount equals or exceeds the Minimum Transferor Amount
and (b) if on any Distribution Date during the Revolving Period (after giving
effect to all distributions and adjustments to be made on such Distribution
Date), the portion of the Class D Investor Amount owned by the Transferor is
less than 2% of the Investor Amount and the Minimum Transferor Interest
Percentage is then less than 2%, the Transferor will be required, on or before
the last day of the second Monthly Period following the Monthly Period in which
such Distribution Date occurs (unless the portion of the Class D Investor Amount
owned by the Transferor then equals or exceeds 2% of the Investor Amount), to
(i) repurchase or otherwise repay certificates (to the extent permitted) or
designate Additional Accounts to the extent necessary to permit the designation
of a Minimum Transferor Interest Percentage of 2% without causing the Transferor
Amount to be less than the Minimum Transferor Amount and (ii) upon compliance
with clause (i), designate 2% as the Minimum Transferor Interest Percentage. In
the event that the Transferor has designated a Minimum Transferor Interest
Percentage in excess of 0%, the Transferor may, during the Revolving Period,
designate a lower percentage (not less than 0%) if the portion of Class D
Investor Amount owned by the Transferor as a percentage of the Investor Amount
averaged over the three Distribution Dates preceding such designation (after
giving effect to all distributions and adjustments made on each such
Distribution Date) equals or exceeds 4%; provided, however, such lower
percentage may not be less than 2% if the portion of Class D Investor Amount
owned by the Transferor as a percentage of the Investor Amount on the
Distribution Date preceding such designation (after giving effect to all
distributions and adjustments made on such Distribution Date) does not equal or
exceed 2%. The "Minimum Transferor Amount" will generally be equal to the
product of the aggregate adjusted investor amount for all Series outstanding and
the applicable Minimum Transferor Interest Percentage.
If as a result of an adjustment (i) the Principal Receivables plus the
Excess Funding Account balance is less than (ii) the aggregate investor amount
of all Series (after giving effect to any required transfer of Receivables in
Additional Accounts to the Trust and any amounts deposited in the Excess Funding
Account), and the Transferor fails to make any payment required by the Pooling
and Servicing Agreement in respect thereof, then the amount of such deficiency
will be allocated among all Series in the proportion that each Series' investor
amount bears to the aggregate investor amounts for all Series outstanding (a
"Series Adjustment Amount"). The Series Adjustment Amount will be allocated as
described above under "-- Allocation of Investor Default Amount; Adjustment
Amounts; Investor Charge Offs." A Series Adjustment Amount will be reduced and
the investor amount increased to the extent that allocations of Excess Spread
and Shared Excess Finance Charge Collections covers the Series Adjustment
Amount, the amount of Principal Receivables in the Trust increases, certificates
are repaid, amounts are deposited in the Excess Funding Account or the
Transferor subsequently makes a payment allocable to Series 1997-2 in respect of
an adjustment. Reductions in a Series Adjustment Amount will be allocated first
to the Class A Certificates, then to the Class B Certificates, then to the
Collateral Indebtedness Interest and finally to the Class D Certificates, in
each case to the extent of any reductions in the Class A Investor Amount, the
Class B Investor Amount, the Collateral Indebtedness Amount or the Class D
Investor Amount, as applicable, attributable to a Series Adjustment Amount.
Under the terms of the Pooling and Servicing Agreement, fraud-related
receivables will be treated as an Adjustment and not as Defaulted Receivables.
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OPTIONAL REPURCHASE; FINAL PAYMENT OF PRINCIPAL; TERMINATION
The Series 1997-2 Certificates are subject to optional repurchase by the
Transferor on any Distribution Date on or after the Distribution Date on which
the sum of the Class A Adjusted Investor Amount, the Class B Adjusted Investor
Amount, the Collateral Indebtedness Amount and the amount of the Class D
Investor Amount held by parties other than the Transferor or any of its
affiliates is less than or equal to 10% of the sum of the Class A Investor
Amount on the Closing Date, the Class B Investor Amount on the Closing Date, the
Collateral Indebtedness Amount on the Closing Date and the highest amount of the
Class D Investor Amount held by parties other than the Transferor or any of its
affiliates since the Closing Date. The repurchase price for the Series 1997-2
Certificates will be equal to (a) the Adjusted Investor Amount, plus (b) accrued
and unpaid interest on the 1997-2 Certificates, less (c) the amount held in the
Collection Account allocable to Series 1997-2 to be applied other than to
deposits to the Reserve Account and any excess payable to the Transferor as
holder of the Exchangeable Transferor Certificate.
In any event, if the Investor Amount has not been reduced to zero on or
prior to the Distribution Date which occurs in , final payment in
respect of the 1997-2 Certificates as of such day is required to be made on such
day. The final payment will be funded by the proceeds of the sale, to the extent
necessary, of an amount of Receivables equal to 110% of the Adjusted Investor
Amount.
The Trust will terminate upon the earlier of (i) the day designated by the
Transferor after the Distribution Date following the date on which funds shall
have been deposited in the collection account or applicable principal account
sufficient to pay the aggregate investor amount plus interest through such
Distribution Date and (ii) the day on which the final payment of principal is
made to the holders of Series 1997-2 Certificates and certificates of all other
outstanding Series, and all right, title and interest in and to the Receivables
and other funds of the Trust (other than funds on deposit in the Principal
Account) will be transferred to the holder of the Exchangeable Transferor
Certificate.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables and certain other amounts for any
Monthly Period allocated to any Series in a Group will first be used to cover
certain amounts described in the related Series Supplements (including any
required deposits into a Principal Account or required distributions to
certificateholders of such Series). The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period (plus certain other
amounts required by the related Series Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series in such Group (collectively,
"Shared Principal Collections"), and will allocate the Shared Principal
Collections to cover any principal distributions to certificateholders and
deposits to Principal Accounts for any Series in such Group which are either
scheduled or permitted and which have not been covered out of collections of
Principal Receivables and certain other amounts for such Series, provided that
the Series Supplement for such Series so provides ("Principal Shortfalls"). If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated pro rata among the Series in a
Group entitled to the benefits thereof based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be distributed to the holder of
the Exchangeable Transferor Certificate; provided, however, that (i) such Shared
Principal Collections will be distributed to the holder of the Exchangeable
Transferor Certificate only to the extent the Transferor Amount is greater than
the Minimum Transferor Amount and (ii) in certain circumstances described under
"-- Excess Funding Account," such Shared Principal Collections will be deposited
in the Excess Funding Account. Any such reallocation of collections of Principal
Receivables and other amounts will not result in a reduction in the Investor
Amount of the Series to which such collections were initially allocated.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group of Series. Each Series in a Group
will be entitled to share Shared Excess Finance Charge Collections in the
manner, and to the extent, described below with each other Series,
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if any, in such Group. Collections of Finance Charge Receivables and certain
other amounts allocable to any Series which is included in such Group in excess
of the amounts necessary to make required payments with respect to such Series
that are payable out of collections of Finance Charge Receivables ("Shared
Excess Finance Charge Collections") will be applied to cover any shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to any other Series included in such Group, pro rata based upon the
amount of the shortfall, if any, with respect to each other Series in such
Group, provided, however, that the sharing of Shared Excess Finance Charge
Collections among Series in a Group will continue only until such time, if any,
at which the Transferor shall deliver to the Trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of the
Transferor or its counsel, the continued sharing of Shared Excess Finance Charge
Collections among Series in any Group would have adverse regulatory implications
with respect to the Transferor. Following the delivery by the Transferor of any
such certificate to the Trustee there will not be any further sharing of Shared
Excess Finance Charge Collections among the Series in a Group. In all cases, any
Shared Excess Finance Charge Collections remaining after covering shortfalls
with respect to all outstanding Series in a Group will be paid to the holder of
the Exchangeable Transferor Certificate. While the Transferor believes that,
based upon applicable rules and regulations as currently in effect, the sharing
of Shared Excess Finance Charge Collections among Series in a Group will not
have adverse regulatory implications that may be applicable if the Transferor is
a bank, there can be no assurance that this will continue to be true in the
future.
PAY OUT EVENTS
As described above, the Revolving Period will continue through and include
the last day of the Monthly Period, unless the Transferor has
designated a different date for the commencement of the Accumulation Period or a
Pay Out Event occurs prior to such date. See "-- Principal Payments."
A "Pay Out Event" refers to any of the following events:
(a) The Transferor or Proffitt's, Inc. shall (i) become insolvent or
admit in writing its inability to pay its debts as they become due or
voluntarily and generally suspend payment of its obligations, (ii)
voluntarily seek, consent to, or acquiesce in the benefit or benefits of
any Debtor Relief Law, (iii) become a party to (or be made the subject of)
any proceeding provided for by any Debtor Relief Law, other than as a
creditor or claimant, and, in the event such proceeding is involuntary, (A)
within 10 Business Days after the Transferor or Proffitt's, Inc. has
knowledge of such proceeding or the filing thereof either (I) the petition
instituting same has not been dismissed or (II) an order has not been
entered by the court having jurisdiction which allows continued transfer to
the Trust of Principal Receivables with no adverse effect to the Trust or
the Certificateholders or (B) an order as contemplated in (A)(II) above
having previously been entered, is no longer in effect other than by reason
of the termination of such proceeding, or (iv) become unable for any reason
to transfer Receivables to the Trust in accordance with the provisions of
the Pooling and Servicing Agreement; or
(b) the Trust or the Transferor shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended; or
(c) failure on the part of the Transferor or the Servicer (i) to make
any payment or deposit required by the terms of (A) the Pooling and
Servicing Agreement, or (B) the Series 1997-2 Supplement, on or before the
date occurring five Business Days after the date such payment or deposit is
required to be made or (ii) duly to observe or perform in any material
respect any covenants or agreements applicable to it set forth in the
Pooling and Servicing Agreement or the Series 1997-2 Supplement, which
failure has a material adverse effect on the holders of the 1997-2
Certificates, and which continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the holders of Series 1997-2 Certificates
representing not less than 50% of the Investor Amount, and continues to
materially and adversely affect the holders of the Series 1997-2
Certificates for such period; or
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(d) any representation or warranty made by the Transferor in the
Pooling and Servicing Agreement or the Series 1997-2 Supplement, or any
information contained in a computer file, microfiche or written list
required to be delivered by the Transferor pursuant to the Pooling and
Servicing Agreement, shall prove to have been incorrect in any material
respect when made or when delivered, (i) which continues to be incorrect in
any material respect for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given to the Transferor by the Trustee, or to the Transferor and
the Trustee by the holders of Series 1997-2 Certificates representing not
less than 50% of the Investor Amount, and (ii) as a result of which the
interests of the holders of the Series 1997-2 Certificates are materially
and adversely affected and continue to be materially and adversely affected
for such period; provided, however, that a Pay Out Event shall not be
deemed to have occurred if the Transferor has accepted reassignment of the
related Receivable, or all of such Receivables, if applicable, during such
period in accordance with the provisions of the Pooling and Servicing
Agreement; or
(e) the average of the Portfolio Yields for any three consecutive
Monthly Periods is a rate which is less than the average Base Rate for such
three consecutive Monthly Periods; or
(f) failure to pay the Class A Investor Amount on the Class A Expected
Payment Date or failure to pay the Class B Investor Amount on the Class B
Expected Payment Date; or
(g) the Transferor shall fail to designate, or be unable to designate,
Additional Accounts the Receivables of which will be Eligible Receivables,
as required by the Pooling and Servicing Agreement, and such failure shall
continue for a period of five business days; or
(h) any Servicer Default shall occur which would have a material
adverse effect on the holders of the Series 1997-2 Certificates;
then (i) in the case of any such event described in clauses (c), (d) or (h)
above, after the applicable grace period set forth in such subparagraphs,
either the Trustee or holders of Series 1997-2 Certificates representing
more than 50% of the Investor Amount, by notice then given in writing to
the Transferor and the Servicer (and to the Trustee if given by the holders
of Series 1997-2 Certificates) may declare that a Pay Out Event has
occurred with respect to only the Series 1997-2 Certificates as of the date
of such notice, and (ii) in the case of any such event described in clauses
(a), (b), (e), (f) or (g) above, a Pay Out Event with respect to only the
Series 1997-2 Certificates will be deemed to have occurred, without any
notice or other action, immediately upon the occurrence of such event.
"Portfolio Yield" means with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is (x) the sum of
(i) the amount of collections of Finance Charge Receivables and Shared Excess
Finance Charge Collections allocated to the Series 1997-2 Certificates for such
Monthly Period, (ii) the amount of investment earnings (net of investment
expenses and losses), if any, on the Principal Account and Reserve Account
balances, (iii) interest and earnings (net of investment expenses and losses, if
any) on amounts held in the Cash Collateral Account and included as Excess
Spread pursuant to the Pooling and Servicing Agreement and (iv) the amount of
funds withdrawn from the Reserve Account less (v) an amount equal to the amount
of Defaulted Receivables allocable to the Series 1997-2 Certificates for such
Monthly Period, and the denominator of which is (y) the Investor Amount as of
the last day of the preceding Monthly Period.
"Base Rate" means with respect to any Monthly Period, the sum of (i) the
annualized percentage equivalent of a fraction, the numerator of which is the
sum of the Class A Monthly Interest, Class B Monthly Interest, Collateral
Monthly Interest and Class D Monthly Interest payable on the Series 1997-2
Certificates on the following Distribution Date and the denominator of which is
the Investor Amount as of the last day of the preceding Monthly Period and (ii)
the product of (a) 2% percent per annum and (b) a fraction, the numerator of
which is the Adjusted Investor Amount and the denominator of which is the
Investor Amount, in each case determined as of the last day of the preceding
Monthly Period.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses will be a monthly servicing fee. The monthly servicing fee will
be allocated among the Transferor Amount and the Investor Amount. The Investor
Monthly Servicing Fee for Series 1997-2 for each Monthly Period will be equal to
one-twelfth ( 1/12th) of the product of 2% and the Adjusted Investor Amount as
of the last day of the preceding Monthly Period. The Investor Monthly Servicing
Fee will be funded from collections on Finance Charge Receivables allocable to
the Investor Amount, and will be paid each month from the funds on deposit in
the Collection Account for the account of the Investor Amount. See
"-- Applications of Collections."
The share of the Investor Monthly Servicing Fee allocable to each class of
Certificates will be calculated as follows: (i) the share of such fee allocable
to the Class A Certificates (the "Class A Servicing Fee") with respect to any
Distribution Date shall be equal to one-twelfth ( 1/12th) of the product of (a)
the Servicing Fee Percentage and (b) the Class A Adjusted Investor Amount;
provided, however, with respect to the first Distribution Date, the Class A
Servicing Fee shall be equal to $ , (ii) the share of such fee
allocable to the Class B Certificates (the "Class B Servicing Fee") with respect
to any Distribution Date shall be equal to one-twelfth ( 1/12th) of the product
of (a) the Servicing Fee Percentage and (b) the Class B Adjusted Investor
Amount; provided, however, with respect to the first Distribution Date, the
Class B Servicing Fee shall be equal to $ , (iii) the share of such fee
allocable to the Collateral Indebtedness Interest (the "Collateral Servicing
Fee") with respect to any Distribution Date shall be equal to one-twelfth
( 1/12th) of the product of (a) the Servicing Fee Percentage and (b) the
Collateral Indebtedness Amount; provided, however, with respect to the first
Distribution Date, the Collateral Servicing Fee shall be equal to $ ,
and (iv) the share of such fee allocable to the Class D Certificates (the "Class
D Servicing Fee") with respect to any Distribution Date shall be equal to
one-twelfth ( 1/12th) of the product of (a) the Servicing Fee Percentage and (b)
the Class D Investor Amount; provided, however, with respect to the first
Distribution Date, the Class D Servicing Fee shall be equal to $ .
The Servicer will pay from its servicing compensation the expenses incurred
in connection with servicing the Receivables including, without limitation,
payment of the fees and disbursements of independent accountants and the
Subservicer, if any.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except upon determination that (i) performance
of its duties is or will become impermissible under applicable law, regulation
or order and (ii) there is no reasonable action which the Servicer could take to
make the performance of its duties permissible under such applicable law,
regulation or order. No such resignation will become effective until the Trustee
or a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the Pooling and Servicing Agreement. The Servicer may delegate
any of its servicing duties to any person or entity that agrees to conduct such
duties in accordance with the Credit Card Guidelines and the Pooling and
Servicing Agreement; however, such delegation will not relieve the Servicer of
its liability and responsibility to perform such duties in accordance with the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement provides that Proffitt's, Inc., as
initial Servicer, will indemnify the Transferor, the Trust and the Trustee,
including its officers, directors, agents and employees, from and against any
loss, liability, expense, damage or injury suffered or sustained by them and
arising out of or relating to any claims, actions or proceedings brought or
asserted by third parties regarding the activities of the Trust or the Trustee
for which the Servicer is responsible pursuant to the Pooling and Servicing
Agreement or the Series 1997-2 Supplement; provided, however, that the Servicer
shall not indemnify (a) the Transferor, the Trust, the Trustee for liabilities
imposed by reason of fraud, negligence or breach of fiduciary duty by (i) the
Trustee in the performance of its duties under the Pooling and Servicing
Agreement or (ii) the Transferor or any Certificateholder, (b) the Transferor,
the Trust, the Trustee, the Certificate Owners or the Certificateholders for
liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Transferor, the Trust, the Trustee, the Certificate
Owners or the Certificateholders as to any losses, claims or damages incurred by
a Certificateholder or a Certificate Owner in its capacity as an investor,
including without
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limitation losses incurred as a result of Defaulted Receivables or Receivables
which are charged off as uncollectible or (d) the Trust, the Trustee, the
Certificate Owners or the Certificateholders for any liabilities, costs or
expenses of the Trust, the Trustee or the Certificate Owners or
Certificateholders arising under any tax law, including, without limitation, any
federal, state or local income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or arising
from a failure to comply therewith) required to be paid by the Trust, the
Certificate Owners or the Certificateholders in connection with the Trust or the
Pooling and Servicing Agreement to any taxing authority. Except as set forth in
the preceding sentence, the Pooling and Servicing Agreement provides that
neither the Servicer nor any of its directors, officers, employees or agents
will be under any other liability to the Trust, the Trustee, the
Certificateholders or any other person for any action taken, or for refraining
from taking any action pursuant to the Pooling and Servicing Agreement. Neither
the Transferor nor the Servicer nor any of their respective directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of the Transferor, the Servicer or any such person in the performance
of its duties. The Transferor and the Servicer will be liable for any actual
damages resulting directly from the material failure to perform any of their
respective obligations under the Pooling and Servicing Agreement. In addition,
the Pooling and Servicing Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Pooling and Servicing
Agreement and which in its opinion may expose it to any expense or liability.
Any entity into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated or any entity resulting
from any merger or consolidation to which the Servicer is a party, or any entity
succeeding to the business of or acquiring all or substantially all the
properties or assets of, the Servicer, upon execution of a supplement to the
Pooling and Servicing Agreement, delivery of an opinion of counsel with respect
to the compliance of the transaction with the applicable provisions of the
Pooling and Servicing Agreement and delivery of notice thereof to each Rating
Agency and the satisfaction of the Rating Agency Condition, will be the
successor to the Servicer under the Pooling and Servicing Agreement.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor and the Trustee in writing that
such action will not result in a reduction or withdrawal of its rating of any
outstanding Series with respect to which it is a Rating Agency.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below) that has not been
remedied, either the Trustee or the holders of certificates of any Series then
outstanding evidencing undivided interests aggregating more than 50% of the
aggregate Investor Amount, by written notice to the Servicer (and to the
Trustee, if given by the holders of certificates of any Series then
outstanding), may terminate all of the rights and obligations of the Servicer,
in its capacity as servicer under the Pooling and Servicing Agreement, with
respect to all of the Receivables held by the Trust with respect to all Series,
and the proceeds thereof, and the Trustee shall thereafter appoint a new
Servicer (a "Service Transfer"). The rights and interests of the Transferor
under the Pooling and Servicing Agreement in the Transferor Interest will not be
affected by any Service Transfer. The Transferor shall have the right to
nominate to the Trustee a potential successor Servicer. The Trustee shall as
promptly as possible appoint the entity nominated by the Transferor if such
entity meets certain eligibility criteria set forth in the Pooling and Servicing
Agreement. If the Transferor does not nominate an entity to be successor
Servicer, the Trustee shall as promptly as possible appoint a successor
Servicer, and if no successor Servicer has been appointed by the Trustee and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all authority, power and obligations of the Servicer under the Pooling and
Servicing Agreement will pass to, and be vested in, the Trustee. Prior to any
Service Transfer, the Trustee will seek to obtain bids from potential servicers
meeting certain eligibility requirements set forth in the Pooling and Servicing
Agreement to serve as a successor Servicer for servicing compensation not in
excess of the Investor Monthly Servicing Fee plus the servicing fee allocable to
the Transferor Interest. If the Trustee is unable to obtain any bids from
eligible Servicers and the Servicer delivers an officer's certificate to the
effect that it cannot in good faith cure the related Servicer Default, then the
Trustee will under certain circumstances offer
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the Transferor the right to accept the reassignment of all of the Receivables.
The deposit amount of such a reassignment shall be equal to the sum of the
aggregate Investor Amount (less the aggregate principal amount held in the
Excess Funding Account and any principal funding account with respect to any
Series) plus accrued and unpaid interest on the certificates of all Series plus
certain amounts payable to specified providers of credit enhancement, if
applicable.
A "Servicer Default" means any of the following events:
(i) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions or notice to the Trustee to make such payment,
transfer or deposit, on the date the Servicer is required to do so under
the Pooling and Servicing Agreement or any Series Supplement (upon
expiration of a five business day grace period), provided, however, that
any such failure caused by circumstances beyond the Servicer's control
shall not constitute a Servicer Default if the Servicer promptly remedies
such failure within five business days after receiving notice thereof or
otherwise becoming aware of such failure;
(ii) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Pooling and
Servicing Agreement or any Series Supplement which has a material adverse
effect on the certificateholders of any Series then outstanding (without
regard to any Available Enhancement Amount), which continues unremedied for
a period of 60 days after written notice and which continues to materially
adversely affect the rights of the certificateholders of any Series then
outstanding for such period, or the Servicer delegates its duties under the
Pooling and Servicing Agreement, except as specifically permitted
thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement or any Series Supplement or
in any certificate delivered pursuant to the Pooling and Servicing
Agreement or any Series Supplement proves to have been incorrect when made,
which has a material adverse effect on the rights of the certificateholders
of any Series outstanding (without regard to the amount of any Available
Enhancement Amount), and which continues to be incorrect in any material
respect for a period of 60 days after written notice and which continues to
materially adversely affect the rights of the certificateholders of any
Series (without regard to the amount of any enhancement) then outstanding
for such period; or
(iv) the occurrence of certain events of bankruptcy or insolvency
relating to the Servicer (such events include the appointment (voluntary or
involuntary) of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings relating to the Servicer of all or substantially all of its
property and the Servicer admitting in writing its inability to pay its
debts as they become due, filing a petition to take advantage of an
insolvency or reorganization statute, making an assignment for the benefit
of its creditors or voluntarily suspending payment of its obligations).
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of 10 business days after the
applicable grace period or a delay in or failure of performance referred to
under clauses (ii) or (iii) for a period of 60 business days after the
applicable grace period shall not constitute a Servicer Default, if such delay
or failure could not have been prevented by the exercise of reasonable diligence
by the Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event, the Servicer shall
not be relieved from using its best reasonable efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement or any Series Supplement, and the Servicer shall provide the
Trustee and the providers of credit enhancement, if any, applicable to any
Series, the Transferor and the Certificateholders prompt notice of such failure
or delay by it, together with a description of its efforts to so perform its
obligations. The Servicer will immediately notify the Trustee in writing of any
Servicer Default.
REPORTS TO CERTIFICATEHOLDERS
By each Distribution Date, the Paying Agent will forward to the Trustee and
each Rating Agency a statement prepared by the Servicer (the "Monthly Servicer
Report") setting forth certain information with respect to the Trust and
certificates of each Series, including: (a) the aggregate amount of collections
of
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Finance Charge Receivables and the aggregate amount of collections of Principal
Receivables processed during the immediately preceding Monthly Period; (b) the
Investor Percentage for such Monthly Period; (c) for each Series and for each
class within any such Series, the total amount of such distribution allocable to
principal and interest, if any, (d) the aggregate outstanding balance of the
Accounts which were delinquent by 31 days, 61 days and 91 days or more as of the
close of business on the last day of the Monthly Period immediately preceding
such Distribution Date; (e) the Investor Default Amount for the immediately
preceding Monthly Period; (f) the amount of Investor Charge Offs and the amount
of reimbursements thereof for the next succeeding Distribution Date; (g) the
amount of the Investor Monthly Servicing Fee for the next succeeding
Distribution Date; (h) the aggregate amount of Receivables in the Trust at the
close of business on the last day of the Monthly Period immediately preceding
such Distribution Date; (i) the Investor Amount and the Adjusted Investor Amount
at the close of business on the last day of the Monthly Period immediately
preceding such Distribution Date; and (j) whether a Pay Out Event shall have
occurred. The Trustee will make such statement available to the
Certificateholders or Certificate Owners upon request.
On each Distribution Date with respect to each Series the Paying Agent, on
behalf of the Trustee, will forward to each Certificateholder of record a
statement (the "Payment Date Statement") prepared by the Servicer setting forth
the information with respect to the Certificates of such Series set forth in the
Monthly Servicer Report supplied to the Trustee as described in the preceding
paragraph since the immediately preceding Distribution Date and the following
additional information (which, in the case of (a), (b) and (c) below, will be
stated on the basis of an original principal amount of $1,000 per Certificate):
(a) the total amount distributed; (b) the amount of such distribution allocable
to principal; (c) the amount of such distribution allocable to interest; and (d)
the amount, if any, by which the principal balance of the Certificates exceeds
the Investor Amount as of the Record Date with respect to such Distribution
Date.
On or before June 30 of each calendar year beginning with 1998, the Paying
Agent, on behalf of the Trustee, will furnish to each person who at any time
during the preceding calendar year was a Certificateholder of record a statement
prepared by the Servicer containing the information required to be contained in
the regular monthly report to such Certificateholders, as set forth in clauses
(a), (b) and (c) above aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information (consistent with the treatment of the Offered
Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable the Certificateholder to prepare their tax returns.
Unless Definitive Certificates are issued, all reports and statements to
Certificateholders shall be provided to DTC or its nominee, Cede, as the
registered holder of the Offered Certificates.
ISSUANCE OF NEW SERIES
The Transferor may tender the Exchangeable Transferor Certificate in
exchange for one or more newly issued Series of Certificates and receive a
reissued Exchangeable Transferor Certificate (an "Exchange"). The Transferor may
perform an Exchange by delivering a notice to the Trustee that specifies with
respect to the Series to be issued, among other things, the initial Investor
Amount, the Certificate Rate and the applicable enhancements. On the date of
issuance of a new Series, the Transferor will deliver, among other things, to
the Trustee (i) a supplement in satisfactory form, (ii) the applicable
enhancement, if any, (iii) an opinion of counsel that the delivery of the
Certificates with respect to such Series does not adversely affect the tax
opinion originally delivered, (iv) an agreement, if any, pursuant to which the
enhancement provider agrees to provide enhancement, (v) the satisfaction of the
Rating Agency Condition, (vi) the existing Exchangeable Transferor Certificate
and (vii) written certification that the Transferor Amount is at least equal to
the Minimum Transferor Amount.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before June 30 of
each calendar year, beginning with 1998, the Servicer will cause a firm of
independent public accountants to furnish a report covering the preceding annual
period to the effect that such firm has applied certain procedures to certain
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documents and records relating to the servicing of the Accounts, compared the
information contained in the Servicer's certificates delivered during the period
covered by such report with such documents and records and that, based upon such
procedures, no matters came to the attention of such accountants that caused
them to believe that such servicing was not conducted in all material respects
in compliance with specified sections of the Pooling and Servicing Agreement,
except for such exceptions as such accountants believe to be immaterial and such
other exceptions as shall be set forth in such report.
In addition, for each calendar year, such accountants will include as part
of their annual report, a comparison of the mathematical calculations of the
amounts contained in the monthly certificates forwarded by the Servicer during
the period covered by such report with the Servicer's computer reports that were
the source of such amounts and deliver a report to the Trustee confirming that
such amounts are consistent, except for such exceptions as such accountants
believe to be immaterial and such other exceptions as shall be set forth in such
report. The Trustee will make such reports available for inspection by
Certificateholders.
The Pooling and Servicing Agreement provides for delivery to the Trustee on
or before June 30 of each calendar year, beginning with 1998, of an annual
statement signed by an officer of the Servicer to the effect that to the best of
such officer's knowledge the Servicer has fully performed its obligations under
the Pooling and Servicing Agreement throughout the preceding year, or if there
has been a default in the performance of any such obligation, specifying the
nature and status of the default.
AMENDMENTS
The Pooling and Servicing Agreement and the Series 1997-2 Supplement also
may be amended by the Transferor, the Servicer and the Trustee, without the
consent of any of the Certificateholders, to cure any ambiguity, to revise
certain exhibits and schedules, to correct or supplement any provision therein
which may be inconsistent with any other provision therein, to add other
identifying code numbers to the definition of Account, or to add any other
provisions with respect to matters or questions arising under the Pooling and
Servicing Agreement which are not inconsistent with the provisions of the
Pooling and Servicing Agreement. No such amendment, however, may adversely
affect in any material respect the interests of the Certificateholders.
The Pooling and Servicing Agreement and the Series 1997-2 Supplement also
may be amended by the Transferor, the Servicer and the Trustee without the
consent of any of the Certificateholders for the purpose of adding, changing or
eliminating any provision thereof or any right of the holders of Certificates
thereunder, provided that (i) the Servicer shall have furnished the Trustee with
an officer's certificate to the effect that the amendment will not materially
and adversely affect the interests of any Certificateholder, (ii) such amendment
will not cause the Trust to be characterized as a corporation for Federal income
tax purposes or otherwise have a material adverse effect on the Federal income
taxation of any Series and (iii) the Servicer shall have given each Rating
Agency 10 business days' prior written notice of such amendment and shall have
received written confirmation from each Rating Agency that the Rating Agency
Condition shall be met as a result of such amendment. No such amendment,
however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth in the next paragraph, or (i) reduce in
any manner the amount of, or delay the timing of, distributions which are
required to be made on any Investor Certificates of any Series, (ii) change the
definition of or the manner of calculating the interest of any
Certificateholder, (iii) alter the requirements for changing the percentage by
which the Minimum Transferor Amount for the Series 1997-2 Certificates is
determined, (iv) change the manner in which the Transferor Amount is determined,
or (v) reduce the percentage required in the following paragraph to consent to
such amendment. Notwithstanding the foregoing, the transfer of Receivables to,
and the generation of new Receivables by, a credit card bank established by
Proffitt's, Inc. and the appointment of the credit card bank as Servicer in
connection with such transfer will be deemed not to materially and adversely
affect the interests of the Certificateholders.
The Pooling and Servicing Agreement may also be amended by the Transferor,
the Servicer and the Trustee with the consent of the holders of certificates of
all Series then outstanding evidencing undivided interests aggregating not less
than 50% of the investor amount of all Series adversely affected, for the
purpose
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of adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or of modifying in any manner
the rights of holders of certificates of any Series then outstanding. No such
amendment, however, may (i) reduce in any manner the amount of, or delay the
timing of, distributions required to be made on any certificate of such Series
without the consent of all holders of the related Certificate, (ii) change the
definition of or the manner of calculating the investor amount, the investor
percentage, the required amount of any enhancement or the investor default
amount of such Series without the consent of each holder of certificates
adversely affected thereby or (iii) reduce the aforesaid percentage of undivided
interests the holders of which are required to consent to any such amendment,
without the consent of all holders of certificates of all Series. Furthermore,
any such amendment shall require prior written confirmation from the applicable
Rating Agency that the Rating Agency Condition will be met.
AMENDMENTS TO THE POOLING AND SERVICING AGREEMENT RELATING TO FASIT ELECTION
Each Certificateholder, by acquiring an interest in an Offered Certificate,
is deemed to consent to any amendment to the Pooling and Servicing Agreement or
the Series 1997-2 Supplement necessary for the Transferor to elect financial
asset securitization trust ("FASIT") status for the Trust or any portion
thereof, provided that, such election may not be made unless the Transferor
delivers to the Trustee an opinion of counsel to the effect that (i) the
issuance of FASIT regular interests will not adversely affect the tax
characterization as debt of certificates of any outstanding Series or Class with
respect to which an opinion of counsel was delivered at the time of their
issuance that such certificates would be characterized as debt, (ii) following
such issuance the Trust will not be classified for Federal income tax purposes
as an association (or publicly traded partnership) taxable as a corporation and
(iii) such issuance will not cause or constitute an event in which gain or loss
would be recognized by any Certificateholder. See "Federal Income Tax
Consequences -- Recent Legislation."
LIST OF CERTIFICATEHOLDERS
Upon written request of certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the investor amount of
any Series, the Trustee, after having been adequately indemnified by such
certificateholders for its costs and expenses, and having given the Servicer
notice that such request has been made, the Trustee will afford such
certificateholders access during normal business hours to a list of
certificateholders of the Trust that is as of a date no more than 45 days prior
to the date the Trustee received the applicable request, for purposes of
communicating with other certificateholders with respect to their rights under
the Pooling and Servicing Agreement. See "-- Book-Entry Registration" and "--
Definitive Certificates."
The Pooling and Servicing Agreement generally does not provide for any
annual or other meetings of Certificateholders.
THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee and initial
Paying Agent under the Pooling and Servicing Agreement. The Transferor, the
Servicer, the Sellers, and their respective affiliates have had deposit, lock
box, borrowing and similar transactions with the Trustee in the ordinary course
of business, and may hereafter have further relationships and transactions with
the Trustee and its affiliates. The Trustee, the Transferor, the Servicer and
any of their respective affiliates may hold certificates of any Series in their
own names. In addition, for purposes of meeting the legal requirements of
certain jurisdictions, the Trustee shall have the power to appoint a co-trustee
or separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee by the Pooling and Servicing Agreement shall be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, except
in any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, in which case such rights, powers, duties and obligations
shall be conferred and imposed singly upon such separate trustee or co-trustee,
who shall exercise and perform such rights, powers, duties and obligations
solely at the direction of Trustee.
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The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Transferor will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
The Trustee's address is Norwest Bank Minnesota, National Association,
Norwest Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0070,
Attention: Asset Backed Securities Corporate Trust Department, telephone number
(612) 667-9528.
BOOK-ENTRY REGISTRATION
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe), if they are participants of such
systems, or indirectly through organizations that are participants in such
systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with the DTC Rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant on such business day. Cash received in
Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
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Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, the Offered Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal of and interest on the Certificates from the Trustee through the
Participants who in turn will receive them from DTC. Under a book-entry format,
Certificate Owners may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC
will forward such payments to its Participants which thereafter will forward
them to Indirect Participants or Certificate Owners. It is anticipated that the
only "Certificateholder" with respect to each class of Offered Certificates will
be Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and Certificate Owners will only be permitted to exercise the rights
of Certificateholders indirectly through the Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "DTC Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Offered
Certificates and is required to receive and transmit distributions of principal
and interest on the Offered Certificates. Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate Owners
will receive payments and be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge Offered Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Offered Certificates, may be limited due to the lack of a physical certificate
for such Offered Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under any related Agreement only at the direction
of one or more Participants to whose account with DTC the Offered Certificates
are credited. Additionally, DTC has advised the Transferor that it will take
such actions with respect to specified percentages of the Investor Amount only
at the direction of and on behalf of Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Participants whose holdings include such
undivided interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes in
accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 34
currencies, including United States Dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of any Series of Certificates.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 34
currencies, including United States Dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in more than 25 countries generally similar to
the arrangements for cross-market transfers with DTC described
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above. The Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euroclear Clearance System, Societe Cooperative, a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative Board establishes policy for the Euroclear System.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any Series of Certificates. Indirect access to the
Euroclear System is also available to other firms that maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "Terms
and Conditions"). The Terms and Conditions govern transfers of securities and
cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedel or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Certificates among participants of DTC,
Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, Cedel or Euroclear should discontinue its
services, the Transferor would seek an alternative depository (if available) or
cause the issuance of Definitive Certificates to Certificate Owners or their
nominees in the manner described under "-- Definitive Certificates."
DEFINITIVE CERTIFICATES
The Offered Certificates will be issued in fully registered, certificated
form to Certificate Owners or their nominees ("Definitive Certificates"), rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to the Offered Certificates, and the
Trustee or the Transferor is unable to locate a qualified successor, (ii) the
Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence of a
Servicer Default, Certificate Owners representing not less than 50% (or such
other percentage specified in the related Prospectus Supplement) of the Investor
Amount advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto) is no
longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Certificate Owners through
the Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the definitive certificate representing the Offered
Certificates and receipt of instructions for reregistration, the Trustee will
issue the Offered Certificates as Definitive
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Certificates and, thereafter, the Trustee will recognize the holders of such
Definitive Certificates as holders under the Policy and Servicing Agreement.
Distribution of principal and interest on the Offered Certificates will be
made by the Trustee directly to holders of Definitive Certificates in accordance
with the procedures set forth herein and in the Series 1997-2 Supplement and the
Pooling and Servicing Agreement. Interest payments and any principal payments on
each Distribution Date will be made to holders in whose names the Definitive
Certificates were registered at the close of business on the related Record
Date. Distributions will be made by check mailed to the address of such holder
as it appears on the register maintained by the Trustee. The final payment on
any Certificate (whether Definitive Certificates or the Certificates registered
in the name of Cede representing the Offered Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to Certificateholders. The
Trustee will provide such notice to registered Certificateholders not later than
the fifth day of the month of such final distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar for the Offered Certificates, (the
"Transfer Agent and Registrar"), which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENTS
The Receivables transferred to the Trust by the Transferor are acquired by
the Transferor from the Sellers pursuant to the Receivables Purchase Agreements
entered into between the Transferor as purchaser of the Receivables and each of
the Sellers as a seller of the Receivables, in the form filed as an exhibit to
the Registration Statement of which this Prospectus is a part. Under the
applicable Receivables Purchase Agreements, each of the Sellers agrees to sell
or transfer Receivables in specified Accounts to the Transferor. Pursuant to the
Pooling and Servicing Agreement, all such Receivables are immediately
transferred by the Transferor to the Trust, and the Transferor assigns its
rights in, to and under each Receivables Purchase Agreement to the Trust. The
following summary describes certain terms of the Receivables Purchase Agreements
and is qualified in its entirety by reference to the Receivables Purchase
Agreements.
Under the Receivables Purchase Agreements, each Seller may from time to
time designate certain of their subsidiaries, divisions or department stores as
"Selling Subsidiaries." To become a Selling Subsidiary, (i) the applicable
entity must execute an assumption agreement pursuant to which it assumes certain
obligations under the applicable Receivables Purchase Agreement and is granted
the right to sell Receivables to the Transferor on the terms set forth in the
applicable Receivables Purchase Agreement, (ii) the applicable entity must
deliver certain other documents (including UCC-1 financing statements) to the
Transferor, the Trustee and the Rating Agencies, (iii) certain representations
and warranties made by such must be true as of the date it first sells
Receivables to the Transferor, and (iv) each Rating Agency must confirm that the
Rating Agency Condition will be met. There will be no Selling Subsidiaries when
the Series 1997-2 Certificates are issued; however, for the purpose of
describing the Receivables Purchase Agreements, each reference to the Sellers in
this section shall be deemed to include each Selling Subsidiary.
SALE OR TRANSFER OF RECEIVABLES
Pursuant to the Receivables Purchase Agreements, each of the Sellers has
sold to the Transferor all its right, title and interest in and to all the
Receivables in the Accounts created by each such Seller as of the Cut-Off Date
and all Receivables thereafter created in such Accounts. With respect to the
Receivables in each Additional Account added from time to time to the Accounts,
as of the date of such addition each of the Sellers shall transfer such
Receivables and all Receivables thereafter created in such Accounts to the
Transferor. The purchase price of the purchased Receivables will be the unpaid
balance at the time of the sale less a fee equal to the amount determined from
time to time in accordance with the Receivables Purchase Agreement. Such
purchase price will be payable by the Transferor in cash, a subordinated note,
or for those Sellers who are equity owners of PCC, a capital contribution to PCC
or any combination thereof. The
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purchase price of each Receivable purchased will be adjusted monthly if any
merchandise giving rise thereto is returned or refused by a Seller's customer,
the Servicer grants a refund, chargeback or adjustment, the customer asserts a
valid counterclaim or the Servicer determines that the Receivable was created as
the result of a fraudulent or counterfeit charge.
In connection with the sale or transfer of the Receivables to the
Transferor, each of the Sellers has agreed to include in its books and records,
including the computer files of the Receivables, statements and notations
evidencing that the Receivables have been sold or transferred to the Transferor,
and that such Receivables have been transferred by the Transferor to the Trust.
In addition, each of the Sellers will make available to the Transferor a
computer file, microfiche or written list containing a true and complete list
showing each Account, identified by account number and by Receivables balance as
of the Cut-Off Date. The agreements relating to the Accounts and Receivables
will not be segregated from other agreements relating to other credit card
accounts and receivables, and will not be stamped or marked to reflect the sale
or transfer of the Receivables to the Transferor. Each of the Sellers has filed
UCC financing statements with respect to the Receivables meeting the
requirements of state law in the states in which the Sellers' chief executive
offices are located. See "Certain Legal Aspects of the Receivables."
In general, Accounts will be automatically included in the Trust as
Automatic Additional Accounts when created in the normal operation of the
Sellers' credit card program. Pursuant to the Receivables Purchase Agreements,
each Seller will, if the Transferor is required or determines to cause the
Sellers to designate Additional Accounts under the Pooling and Servicing
Agreement, designate Additional Accounts to be included as Accounts under the
applicable Receivables Purchase Agreement. Each of the Sellers and the
Transferor may also agree from time to time to designate Additional Accounts
under the applicable Receivables Purchase Agreement. The Transferor and the
Sellers may agree that the Sellers will repurchase Accounts designated as
Removed Accounts pursuant to the Pooling and Servicing Agreement. The purchase
price for Accounts so designated will be an amount equal to the total unpaid
balance thereof. See "Description of the Series 1997-2 Certificates and the
Pooling and Servicing Agreement -- Addition of Accounts" and "-- Removal of
Accounts."
REPRESENTATIONS AND WARRANTIES
Each of the Sellers makes certain representations and warranties to the
Transferor to the effect that, among other things, (a) as of the initial closing
date it is duly incorporated and in good standing and that it has the authority
to consummate the transactions contemplated by the applicable Receivables
Purchase Agreement and (b) as of the Cut-Off Date (or as the date of the
addition of Additional Accounts) each Account was an Eligible Account.
Each of the Sellers also makes representations and warranties to the
Transferor relating to the Receivables to the effect, among other things, that
(a) as of the initial closing date, each of the Receivables then existing is an
Eligible Receivable and (b) as of the date any new Receivable is created, such
Receivable is an Eligible Receivable and the representation and warranty set
forth in clause (b) in the immediately following paragraph is true and correct
with respect to such Receivable. In the event of a breach of any representation
and warranty set forth in this paragraph which results in the requirement that
the Transferor accept retransfer of each Ineligible Receivable as to which such
breach relates pursuant to the Pooling and Servicing Agreement, the Seller of
such Receivable shall repurchase such Ineligible Receivable from the Transferor
on the date of such retransfer. The purchase price for such Ineligible
Receivable shall be the face amount of thereof, of which at least the amount of
any cash deposit required to be made by the Transferor under the Pooling and
Servicing Agreement in respect of the retransfer of such Ineligible Receivable
shall be paid in cash.
Each of the Sellers also makes representations and warranties to the
Transferor to the effect, among other things, that as of the initial closing
date (a) the applicable Receivables Purchase Agreement constitutes a legal,
valid and binding obligations of such Seller and (b) the applicable Receivables
Purchase Agreement constitutes a valid sale or transfer to the Transferor of all
right, title and interest of such Seller in and to the Receivables, whether then
existing or thereafter created in the Accounts and the process thereof which is
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effective as to each Receivable upon the creation thereof. If the breach of any
of the representations and warranties described in this paragraph results in the
Transferor having an obligation under the Pooling and Servicing Agreement to
accept retransfer of the Receivables, the applicable Seller(s) will repurchase
the Receivables retransferred to the Transferor by it for an amount of cash
equal to the amount of cash the Transferor is required to deposit under the
Pooling and Servicing Agreement in connection with such retransfer.
Each of the Sellers agrees to indemnify the Transferor and to hold the
Transferor harmless from and against any and all losses, damages and expenses
(including reasonable attorneys' fees and charges) suffered or incurred by the
Transferor arising from a material breach of such Seller's representations and
warranties set forth above.
CERTAIN COVENANTS
In each Receivables Purchase Agreement, each Seller covenants that it will
perform its obligations under the credit card agreements relating to the
Accounts and its Credit Card Guidelines relating to the Accounts unless the
failure to do so would not have a material adverse effect on the rights of the
Transferor, the Trust, as assignee of the Receivables or the Certificateholders,
on the Servicer's ability to collect the Receivables, on the validity or
enforceability of the applicable Receivables Purchase Agreement, the Pooling and
Servicing Agreement or the other agreements and documents related thereto or on
the performance by any party of its obligations thereunder. In this regard, each
of the Sellers may change the terms and provisions of such credit card
agreements or Credit Card Guidelines in any respect (including, without
limitation, the calculation of the amount, or the timing, of charge offs), so
long as any such changes are made applicable to comparable segments of the
credit card accounts originated by each of the Sellers which have
characteristics the same as, or substantially similar to, the Accounts.
Each Seller also covenants that, except as required by law or as such
Seller shall deem advisable for such Seller's credit card program based on a
good faith assessment by such Seller, in its sole discretion, of the various
factors affecting the use of the Seller's credit card accounts, such Seller will
not reduce the finance charges or other fees on the Accounts if, as a result of
such reduction, its reasonable expectation of Portfolio Yield as of the time of
such reduction would be less than the weighted average base rates of all
outstanding Series. In addition, each Seller covenants that, unless required by
law, it will not reduce the annual percentage rate, if its reasonable
expectation of Portfolio Yield would be less than the highest Certificate Rate
for any outstanding Series.
In addition, each Seller expressly acknowledges and consents to the
Transferor's assignment of its rights relating to the Receivables under the
applicable Receivables Purchase Agreement to the Trustee for the benefit of the
Certificateholders.
TERMINATION
Each Receivables Purchase Agreement will terminate immediately after the
Trust terminates, or if a Pay Out Event has occurred with respect to all
outstanding Series of the Trust. In addition, if the Transferor or a Seller
becomes insolvent, admits in writing its inability to pay its debts as they come
due, voluntarily and generally suspends payment of its obligations or becomes
party to any bankruptcy or similar proceeding (other than as a claimant) and, if
such proceeding is not voluntary and is not dismissed within the time periods
provided in each Receivables Purchase Agreement, the Sellers will immediately
cease to sell or transfer Receivables to the Transferor and promptly give notice
of such event to the Transferor and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Each of the Sellers sells the Receivables to the Transferor and the
Transferor transfers the Receivables to the Trust. Each of the Sellers warrants
to the Transferor that the sale of Receivables by it constitutes a valid
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sale to the Transferor of all right, title and interest of each such Seller in
and to the Receivables, and the Transferor warrants to the Trustee that its
transfer constitutes a valid transfer to the Trust of all right, title and
interest of the Transferor in and to the Receivables, except for the interest of
the Transferor as holder of the Exchangeable Transferor Certificate. The
Transferor further warrants to the Trust that if the transfer of the Receivables
to the Trust does not constitute a valid transfer of the Receivables, it
constitutes a grant of a security interest to the Trust in and to the
Receivables. The Transferor also warrants to the Trust that, if the transfer of
Receivables to the Trust is deemed to create a security interest under the UCC,
there exists a valid and enforceable first priority perfected security interest
in the Receivables exists at the time of the formation of the Trust in favor of
the Trust and a valid and enforceable first priority perfected security interest
in the Receivables created thereafter in favor of the Trust on and after their
creation (except for certain liens permitted under the Pooling and Servicing
Agreement), in each case until termination of the Trust. For a discussion of the
Trust's rights arising from a breach of these warrants, see "Description of the
Series 1997-2 Certificates and the Pooling and Servicing
Agreement -- Representations and Warranties."
Each Seller warrants to the Transferor, and the Transferor warrants to the
Trust, that the Receivables are "accounts," "general intangibles" or "chattel
paper" for the purposes of the UCC. Both the sale or transfer of accounts or
chattel paper and the transfer of accounts or chattel paper as security for an
obligation are treated under the UCC as creating a security interest therein and
are subject to its provisions, and in either case the filing of appropriate
financing statements is required to perfect the interests of the Transferor and
the Trust in the Receivables. If a transfer of general intangibles is deemed to
create a security interest, the UCC applies and the filing of appropriate
financing statements is required to perfect the interests of the Transferor and
the Trust in the Receivables. Financing statements covering the Receivables were
therefore filed under the UCC to perfect the interests of the Transferor and the
Trust in the Receivables. If a transfer of general intangibles is deemed to be a
sale, then the UCC is not applicable and no action under the UCC is required to
perfect the ownership interest of the Transferor or the Trust in the
Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after the Closing
Date could have an interest in such Receivables with priority over the Trust's
interest. A tax or other government lien on property of the Sellers or the
Transferor arising prior to the time a Receivable comes into existence may also
have priority over the interest of the Trust in such Receivable. Under each
Receivables Purchase Agreement, however, each Seller warrants, and under the
Pooling and Servicing Agreement the Transferor warrants, that each Seller or the
Transferor, as the case may be, has sold or transferred the Receivables to the
Transferor or the Trust, as the case may be, free and clear of the lien of any
third party except as permitted under the Pooling and Servicing Agreement. In
addition, each of the Sellers and the Transferor covenants that each Seller or
the Transferor, as the case may be, will not sell, pledge, assign, transfer or
grant any lien on any Receivable (or any interest therein) other than to the
Transferor or the Trust, as the case may be.
If any Seller or the Transferor were to become a debtor in a bankruptcy
case or certain other events relating to the insolvency of any Seller or the
Transferor were to occur, causing a Pay Out Event pursuant to the Pooling and
Servicing Agreement, new Principal Receivables would not be transferred to the
Trust. If any such events occur with respect to the Transferor, the Trustee
would sell the Receivables (unless holders of more than 50% of the principal
amount of outstanding certificates under all Classes of all Series instruct
otherwise), thereby causing a termination of the Trust and a loss to the
Certificateholders if the net proceeds from such sale is insufficient to pay the
Certificateholders in full. However, in a bankruptcy proceeding affecting the
Transferor, the Transferor may not be permitted to suspend transfers of
Receivables to the Trust, and the Trustee's instructions to sell the Receivables
may not be enforceable. If no Servicer Default other than such insolvency event
exists, the debtor-in-possession may have the power to prevent either the
Trustee or the Certificateholder from appointing a successor Servicer.
CERTAIN MATTERS RELATING TO BANKRUPTCY OR INSOLVENCY
The Transferor has taken steps in structuring the transactions contemplated
hereby that are intended to reduce the risk that a bankruptcy case with respect
to they Company or any of its affiliates, including Sellers, will result in
consolidation of the assets and liabilities of the Transferor with those of any
of such entities. The
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Transferor will not engage in any activities except purchasing Receivables from
the Sellers, forming trusts, transferring such Receivables to such trusts and
engaging in activities incident to, or necessary or convenient to accomplish,
the foregoing. In addition, the Transferor's certificate of incorporation
contains restrictions requiring, among other things, that the Transferor adhere
to specified operating procedures including, without limitation (i) that at all
times no less than two members of the Board of Directors of the Transferor will
be composed of individuals who are not affiliated with the Company or any of its
affiliates, except as members of the Board of Directors of the Transferor, (ii)
the Transferor will maintain its own payroll and separate books of account and
will maintain an office separate from the Company or any of its affiliates,
(iii) except for commingling of certain cash when payments on Receivables are
paid in the Seller's retail stores, the Transferor will not commingle any of its
money or other assets with those of the Company or any of its affiliates, (iv)
the Transferor will maintain separate bank accounts in its own name and (v) the
Transferor will not acquire obligations or securities of, or make loans or
advances to, any of its affiliates, except for subordinated notes payable to the
Sellers and arising out of sales to and by the Transferor of Receivables.
Certain restrictions have been imposed on the Transferor and certain
parties to the transactions described herein which are intended to reduce the
risk of a bankruptcy proceeding involving the Transferor. The Transferor's
certificate of incorporation provides that it will not file a voluntary petition
for relief under the Bankruptcy Code or any applicable state insolvency laws
without the affirmative vote of its independent directors. Pursuant to the
Pooling and Servicing Agreement, the Servicer and the Trustee on behalf of
itself and each certificateholder will covenant that they will not institute
against the Transferor any bankruptcy proceeding under any insolvency law prior
to the date which is one year and one day after the payment of the certificates
in full. The Transferor has no intent to file, and the Company has no intent to
cause the filing of, a voluntary application of relief under any insolvency laws
with respect to the Transferor as long as the Transferor is solvent and does not
reasonably foresee becoming insolvent. Pursuant to the Receivables Purchase
Agreements, each of the Sellers has agreed that it will not institute against
the Transferor any bankruptcy proceeding under any insolvency law prior to the
date which is one year and one day after the date of the termination of the
Trust. The Transferor's business is restricted to those activities related to
transactions of the type contemplated by the Pooling and Servicing Agreement.
Counsel has advised the Transferor that (i) a voluntary application of
relief under the United States Bankruptcy Code or any similar applicable state
law with respect to the Transferor may not lawfully be filed without the prior
consent of all directors of the Transferor, including its independent directors,
(ii) subject to certain assumptions (including the assumption that separateness
and corporate formalities are observed by the Company and the Transferor), the
assets and liabilities of the Transferor would not be substantively consolidated
with the assets and liabilities of the Company in the event of an application
for relief under the United States Bankruptcy Code with respect to the Company,
and (iii) the sale and transfer of Receivables by the Sellers to the Transferor
constitutes a valid sale and transfer and, therefore, such Receivables and the
proceeds thereof should not be a part of the Company's bankruptcy estate under
Section 541 of the Bankruptcy Code if any of the Sellers or the Company should
become a debtor thereunder. Such opinion is not binding on any court.
Accordingly, there can be no assurance that a court will not reach a different
conclusion.
If the Company or any of the Sellers were to become a debtor in a
bankruptcy case and a creditor or a trustee-in-bankruptcy of such debtor or such
debtor itself, as debtor-in-possession, were to take the position that the sale
of Receivables to the Transferor should be recharacterized as a pledge of such
Receivables to secure a borrowing by such debtor, then delays in payment of
collections of Receivables to the Transferor and consequently to the Trust and
delays in payments on the Offered Certificates could occur. If the court were to
rule in favor of such recharacterization then reductions in the amount of such
payments could occur and Certificateholders could experience losses in their
investment in the Offered Certificates.
If, notwithstanding the structure described above, (i) a court concluded
that the assets and liabilities of the Transferor should be consolidated with
the assets and liabilities of the Company, (ii) the Transferor became a debtor
in a bankruptcy proceeding, or (iii) a creditor or a trustee-in-bankruptcy of
such debtor or such debtor itself, as debtor-in-possession, were to litigate the
consolidation issue, then delays in distributions on the Offered Certificates
and possible reductions in the amounts of such distributions could occur.
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CONSUMER AND DEBTOR PROTECTION LAWS, PROPOSED LEGISLATION AND RECENT LITIGATION
The relationship between an accountholder and a credit card issuer is
extensively regulated by federal and state consumer protection laws. With
respect to the Company's credit cards, the most significant federal laws are
those included in the Federal Truth-in-Lending, Equal Credit Opportunity, Fair
Credit Reporting and Fair Debt Collection Practices Acts, as amended. These laws
require, among other things, extension of credit without regard to impermissible
personal attributes (such as race or sex), disclosure of credit costs both
before credit is extended and thereafter in each monthly account statement,
timely response to claimed billing errors and prompt application of payments,
and regulate collection practices. The Trustee may be liable for certain
violations of consumer protection laws that apply to the Receivables, either as
assignee from the Sellers and the Transferor with respect to obligations arising
before transfer of the Receivables to the Trust or as the party directly
responsible for obligations arising after the transfer. In addition, an
accountholder may be entitled to assert such violations by away of set-off
against the obligations to pay the amount of Receivables owing. The Transferor
agrees to accept from the Trust, and the Sellers agree to accept from the
Transferor, the retransfer of all Receivables that have been charged off and
that were not created in compliance in all material respects with the
requirements of such laws. For a discussion of the Trust's rights in the case of
Receivables that are not created in compliance in all material respects with
applicable laws, see "Description of the 1997-2 Certificates and the Pooling and
Servicing Agreement -- Representations and Warranties."
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be prejudiced
by denial of such stay.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in
Receivables being charged off as uncollectible when there is insufficient credit
enhancement to cover such charged off amounts. See "Description of the 1997-2
Certificates and the Pooling and Servicing Agreement -- Allocation of Investor
Default Amount; Adjustment Amounts; Investor Charge Offs."
During recent years, there has been increased consumer awareness with
respect to the level of finance charges and fees and other practices of credit
card issuers and other consumer revolving credit loan providers which could
result in public pressure on federal and state legislators to impose limitations
on finance charges or other fees. For example, legislation has been introduced
in the United States Congress which would limit the finance charges that may be
charged on credit card balances. In particular, on June 19, 1997, a proposal to
amend the Federal Truth-in-Lending Act was introduced in the House of
Representatives and referred to the Committee on Banking and Financial Services,
which would, among other things, prohibit the imposition of certain minimum
finance charges and other fees, prohibit certain methods of calculating finance
charges, require prior notice of any increase in the interest rate assessed with
respect to a credit card account and limit the amount of certain fees. If a
federal or state law imposing a ceiling on finance charge rates were enacted,
each of the Sellers could be required to lower the finance charges that it
assesses on the Receivables to a level which might result in a Pay Out Event,
thus causing commencement of the Rapid Amortization Period and other adverse
consequences to Certificateholders.
Pursuant to the Pooling and Servicing Agreement, the Transferor agrees to
accept retransfer from the Trust, and pursuant to the Receivables Purchase
Agreement, each of the Sellers agrees to repurchase from the Transferor, each
Receivable that did not comply with all requirements of law at the time it was
transferred to the Trust. The Transferor makes to the Trust, and each of the
Sellers makes to the Transferor, certain other representations and warranties
relating to the validity and enforceability of the Receivables. However, it is
not anticipated that the Trustee will make any examination of the Receivables or
the records relating thereto for the purpose of establishing the presence or
absence of defects or compliance with such representations and warranties, or
for any other purpose. The sole remedy if any such representation or warranty is
breached, and such breach continues beyond the applicable cure period, is that
the Transferor will be obligated to accept the retransfer of such Receivables
and each of the Sellers will be obligated to repurchase such Receivables from
the Transferor. See "Description of the 1997-2 Certificates and the Pooling and
Servicing Agreement --
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Representations and Warranties" and "Description of the Receivables Purchase
Agreements -- Representations and Warranties."
ADJUSTMENTS
On any day that the Servicer adjusts the amount of any Principal Receivable
because of transactions occurring in respect of a rebate or refund to an
accountholder, or because such Principal Receivable was created in respect of
merchandise which was refused or returned by an accountholder, or because an
accountholder asserts a valid counterclaim, the Transferor Amount will be
reduced, on a net basis, by the amount of the adjustment (an "Adjustment"). If
any such reductions would cause the Transferor Amount to be reduced below the
Minimum Transferor Amount, the Transferor must deposit cash, in the amount of
such shortfall, into the Excess Funding Account.
Payments made by the Sellers pursuant to the Receivables Purchase
Agreements in respect of purchases of Receivables or reductions in the amount
thereof as described in the preceding paragraph may be recoverable by the
Sellers as debtor-in-possession or by a trustee-in-bankruptcy of any of the
Sellers from the Transferor or the Certificateholders as a preferential
transfer, if such payments were made within one year prior to the commencement
of a bankruptcy case in respect of any of the Sellers.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing the material anticipated Federal
income tax consequences of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Code, Treasury
regulations promulgated thereunder, and published rulings and court decisions in
effect as of the date hereof, all of which are subject to change, possibly
retroactively. This discussion does not address every aspect of the Federal
income tax laws that may be relevant to Certificate Owners of a Series in light
of their personal investment circumstances or to certain types of Certificate
Owners of a Series subject to special treatment under the Federal income tax
laws (for example, banks and life insurance companies). PROSPECTIVE INVESTORS
ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN
CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, LOCALITY, FOREIGN COUNTRY, OR OTHER TAXING JURISDICTION.
The discussion assumes that the Certificates will be issued in registered
form, will have all payments denominated in U.S. dollars and will have a term
that exceeds one year. Moreover, the discussion assumes that the interest
formula for the Certificates meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID Regulations") relating to
original issue discount ("OID"), and that any OID on the Certificates (i.e., any
excess of the principal amount of the Certificates over their issue price) does
not exceed a de minimis amount (i.e., 0.25% of the principal amount multiplied
by the number or full years until maturity), all within the meaning of the OID
Regulations. The Company believes these assumptions will be met with regard to
the Offered Certificates. If any of those assumptions are not met with regard to
a particular Series of Certificates subsequently offered, additional tax
considerations will be disclosed in the applicable Prospectus Supplement.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Alston & Bird LLP, Atlanta, Georgia, special tax counsel to the Transferor
("Special Tax Counsel") has rendered an opinion that the Offered Certificates of
such Series will be treated as indebtedness for Federal income tax purposes.
However, opinions of counsel are not binding on the Internal Revenue Service
(the "IRS") and there can be no assurance that the IRS could not successfully
challenge this conclusion.
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The Transferor expresses in the Pooling and Servicing Agreement its intent
that for Federal, state and local income and franchise tax purposes, the Offered
Certificates will be indebtedness secured by the Receivables. The Transferor
agrees and each Certificateholder and Certificate Owner, by acquiring an
interest in the Offered Certificates, will be deemed to agree to treat the
Offered Certificates as indebtedness of the Transferor for Federal, state and
local income and franchise tax purposes (except to the extent that different
treatment is explicitly required under state or local tax statutes). However,
because different criteria are used to determine the non-tax accounting
characterization of the transactions contemplated by the Agreement, the
Transferor expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables and
not as a debt obligation of the Transferor.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several factors
to be taken into account in determining whether the substance of a transaction
is a sale of property or a secured indebtedness for Federal income tax purposes,
the primary factors in making this determination are whether the Transferor has
assumed the risk of loss or other economic burdens relating to the property and
has obtained the benefits of ownership thereof. In some instances, courts have
held that a taxpayer is bound by a particular form it has chosen for a
transaction, even if the substance of the transaction does not accord with its
form. It is the opinion of Special Tax Counsel that because substantial
incidents of ownership of the Receivables have not been transferred for Federal
income tax purposes by PCC to the Certificate Owners, the Offered Certificates
would properly be viewed in substance as evidence of indebtedness of PCC for
Federal income tax purposes. However, opinions of counsel are not binding on the
IRS and there can be no assurance that the IRS could not successfully challenge
this conclusion. Except as otherwise expressly indicated, the following
discussion assumes that the Offered Certificates are properly treated as debt
obligations of PCC for Federal income tax purposes. See "-- Possible
Classification of the Transaction as a Partnership or as an Association Taxable
as a Corporation".
TREATMENT OF THE TRUST
The Trust could be viewed for Federal income tax purposes either as (1) a
collateral arrangement for debt issued directly by the Transferor and any other
holders of equity interests in the Trust or (2) a separate entity issuing its
own debt and owned by the Transferor and any other holders of equity interests
in the Trust. However, in the opinion of Special Tax Counsel, in the former
event the Trust will be disregarded for Federal income tax purposes and in the
latter event the Trust would be a partnership rather than an association (or
publicly traded partnership) taxable as a corporation. Therefore, in the opinion
of Special Tax Counsel, the Trust will not be subject to Federal income tax.
POSSIBLE CLASSIFICATION OF THE TRANSACTION AS A PARTNERSHIP OR AS AN ASSOCIATION
TAXABLE AS A CORPORATION
It is possible that the IRS could assert that, for purposes of the Code,
some or all of the Offered Certificates are not debt obligations for Federal
income tax purposes and that the proper classification of the legal relationship
between the Transferor, any other holders of equity interests in the Trust, and
the Certificate Owners of such Series resulting from the transaction is that of
a partnership, a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation.
If some or all of the Offered Certificates were treated as equity interests
in a partnership (other than a "publicly traded partnership"), the partnership
itself would not be subject to Federal income tax; rather, the partners of such
partnership, including the Certificate Owners whose interests in the Trust are
treated as equity, would be taxed individually on their respective distributive
shares of the partnership's income, gain, loss, deductions and credits. The
amount and timing of items of income and deductions of a Certificate Owner could
differ if the Offered Certificates were held to constitute partnership
interests, rather than indebtedness. Moreover, an individual's share of expenses
of the partnership would be miscellaneous itemized deductions that, in the
aggregate, are allowed as deductions only to the extent they exceed two percent
of the individual's adjusted gross income, and would be subject to reduction
under Section 68 of the Code if the individual's adjusted gross income exceeded
certain limits. As a result, the individual might be taxed on a greater amount
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of income than the stated rate on the Offered Certificates. Furthermore, if any
Offered Certificates were treated as equity interests in a partnership, all or a
portion of such income allocated to a Certificate Owner that is a pension,
profit sharing or employee benefit plan or other tax-exempt entity (including an
individual retirement account) might constitute "unrelated business taxable
income" generally taxable to such investor under the Code. Finally, if any
Offered Certificates were treated as equity interests in a partnership in which
other interests were debt, all or part of a tax-exempt investor's share of
income from the Offered Certificates that were treated as equity would be
treated under the Code as unrelated debt-financed income taxable to the investor
as unrelated business taxable income.
If the Trust were treated in whole or in part as a partnership in which
some or all Certificate Owners were partners, that partnership could be
classified as a publicly traded partnership taxable as a corporation. A
partnership will be classified as a publicly traded partnership taxable as a
corporation if equity interests therein are traded on an "established securities
market," or are "readily tradable" on a "secondary market" or its "substantial
equivalent" unless certain exceptions apply. One such exception would apply if
the Trust is not engaged in a "financial business" and 90% or more of its income
consists of interest and certain other types of passive income. Because Treasury
regulations do not clarify the meaning of a "financial business" for this
purpose, it is unclear whether this exception applies. The Transferor has taken
and intends to take measures designed to reduce the risk that the Trust could be
classified as a publicly traded partnership taxable as a corporation. However,
there can be no assurance that the Trust could not be classified as a publicly
traded partnership, because certain actions necessary to comply with such
exceptions are not fully within the control of the Transferor.
If it were determined that a transaction created an entity classified as a
corporation (including a publicly traded partnership taxable as a corporation),
the Trust would be subject to Federal income tax at corporate income tax rates
on the income it derives from the Receivables and other investments, which would
reduce the amounts available for distribution to the Certificate Owners,
possibly including Certificate Owners of a Series that is treated as
indebtedness. Such classification might also have adverse state and local tax
consequences that would further reduce amounts available for distribution to
Certificate Owners. Cash distributions to the Certificate Owners (except any
Class not recharacterized as an equity interest in an association) generally
would be treated as dividends for tax purposes to the extent of such deemed
corporation's earnings and profits, and in the case of Certificate Owners that
are non-United States persons, would be subject to withholding tax. See "State
and Local Tax Consequences."
Since Special Tax Counsel will advise that the Offered Certificates will be
treated as indebtedness in the hands of the Certificate Owners for Federal
income tax purposes, the Transferor generally will not attempt to comply with
the Federal income tax reporting requirements that would apply if the Offered
Certificates were treated as interests in a partnership or corporation (unless,
as is permitted by the Agreement, an interest in the Trust is issued or sold
that is intended to be classified as an interest in a partnership).
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, Special Tax Counsel has rendered an opinion, that the
Offered Certificates will be treated as indebtedness for Federal income tax
purposes. The Offered Certificates will not be issued with OID and, accordingly,
interest thereon will be includable in income by Certificate Owners as ordinary
income when received (in the case of a cash basis taxpayer) or accrued (in the
case of an accrual basis taxpayer) in accordance with their respective methods
of tax accounting. Under the OID Regulations, a holder of a Certificate issued
with a de minimis amount of OID must include any such OID in income, on a pro
rata basis, as principal payments are made on the Certificate. Interest received
on the Offered Certificates may also constitute "investment income" for purposes
of certain limitations of the Code concerning the deductibility of investment
interest expense.
A subsequent holder who purchases an Offered Certificate at a discount may
be subject to the "market discount" rules of the Code. These rules provide, in
part, for the treatment of gain attributable to accrued market discount as
ordinary income upon the receipt of partial principal payments or on the sale or
other
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disposition of the Offered Certificate, and for the deferral of certain interest
deductions with respect to debt incurred to acquire or carry the market discount
Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium may
elect to amortize and deduct this premium over the remaining term of Certificate
in accordance with rules set forth in Section 171 of the Code.
SALE OF A CERTIFICATE
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of an Offered Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and taxable
as, accrued interest) and (ii) the Certificate Owner's tax basis in the Offered
Certificate (as increased by any OID or market discount previously included in
income by the holder and decreased by any deductions previously allowed for
amortizable bond premium and by any payments reflecting principal or OID
received with respect to such Certificate). Subject to the market discount rules
discussed above and to the one-year holding requirement for long-term capital
gain treatment, any such gain or loss generally will be long-term capital gain,
provided that the Offered Certificate was held as a capital asset. The maximum
ordinary income rate for individuals, estates, and trusts exceeds the maximum
long-term capital gains rate for such taxpayers. In addition, capital losses
generally may be used only to offset capital gains.
RECENT LEGISLATION
Recently enacted provisions of the Code provide for the creation of a new
type of entity for Federal income tax purposes, the "financial asset
securitization trust" ("FASIT"). However, these provisions are not effective
until September 1, 1997, and many technical issues concerning FASITs must be
addressed by Treasury regulations that have yet to be drafted. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. In particular, it is not clear whether Series 1997-2 Certificates or
certificates of any other Series outstanding on August 31, 1997 would be treated
as "regular interests" in a FASIT if the Transferor were to elect FASIT status
for the Trust after that date.
FOREIGN INVESTORS
As set forth above, Special Tax Counsel has opined that, upon issuance, the
Offered Certificates will be treated as indebtedness for Federal income tax
purposes. The following information describes the Federal income tax treatment
of Foreign Investors if the Offered Certificates are treated as indebtedness.
The term "Foreign Investor" means any person other than (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is includable in gross income for
U.S. Federal income tax purposes, regardless of its source, or (iv) a trust
whose administration is subject to the primary supervision of a United States
court and which has one or more United States fiduciaries who have authority to
control all substantial decisions of the trust.
Interest, including OID, paid to a Foreign Investor generally will not be
subject to U.S. withholding taxes provided that (i) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business
carried on in the United States and the investor evidences this fact by
delivering an IRS Form 4224 or (ii) the Foreign Investor and each securities
clearing organization, bank, or other financial institution that holds the
Offered Certificates on behalf of such Foreign Investor in the ordinary course
of its trade or business, in the chain between the Certificate Owner and the
U.S. person otherwise required to withhold the U.S. tax, complies with
applicable identification requirements (and the Certificate Owner does not
actually or constructively own 10% or more of the voting stock of the Transferor
(or of a profits or capital interest of a trust characterized as a partnership)
and is not a controlled foreign corporation that is related to the Transferor
(or a trust treated as a partnership). Applicable identification requirements
generally will be satisfied if there is delivered to a securities clearing
organization (i) IRS Form W-8 signed under penalties of perjury by the
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Certificate Owner, stating that the Certificate Owner is not a U.S. person and
providing such Certificate Owner's name and address; provided that in any such
case (x) the applicable form is delivered pursuant to applicable procedures and
is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person. See "Description of the
Series 1997-2 Certificates and the Pooling and Servicing Agreement -- Book-Entry
Registration."
Recently proposed Treasury regulations (the "Proposed Regulations") could
affect the procedures to be followed by a Foreign Investor in complying with
United States Federal withholding, backup withholding and information reporting
rules. The Proposed Regulations are not currently effective and could be altered
before being adopted in final form but, if finalized in their current form,
would be effective for payments made after December 31, 1997. Prospective
investors are urged to consult their tax advisors regarding the effect, if any,
of the Proposed Regulations on the purchase, ownership, and disposition of the
Certificates.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of an Offered Certificate, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States, (ii) in the case of a Certificate Owner that is an individual,
such Certificate Owner is not present in the United States for 183 days or more
during the taxable year in which such sale, exchange, or redemption occurs, and
(iii) in the case of gain representing accrued interest, the conditions
described in the second preceding paragraph are satisfied.
If the interests of the Certificate Owners were reclassified as interests
in a partnership (not taxable as a corporation), such recharacterization could
cause a Foreign Investor to be treated as engaged in a trade or business in the
United States. In such event the Certificate Owner would be required to file a
Federal income tax return and, in general, would be subject to Federal income
tax, including branch profits tax in the case of a Certificateholder that is a
corporation (unless eliminated under an applicable tax treaty), on its net
income from the partnership. Further, the partnership would be required, on a
quarterly basis, to pay withholding tax equal to the sum, for each foreign
partner, of such foreign partner's distributive share of "effectively connected"
income of the partnership multiplied by the highest rate of tax applicable to
that foreign partner. The tax withheld from each foreign partner would be
credited against such foreign partner's U.S. income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
BACKUP WITHHOLDING
Certain Certificateholders may be subject to backup withholding at the rate
of 31% with respect to interest paid on the Offered Certificates of a Series if
the Certificateholder, upon issuance, fails to supply the Trustee or his broker
with his taxpayer identification number, furnishes an incorrect taxpayer
identification number, fails to report interest, dividends, or other "reportable
payments" (as defined in the Code) properly, or, under certain circumstances,
fails to provide the Trustee or his broker with a certified statement, under
penalty of perjury, that he is not subject to backup withholding. Information
returns will be sent annually to the IRS and to each Certificateholder setting
forth the amount of interest paid on the Offered Certificates and the amount of
tax withheld thereon.
STATE AND LOCAL TAX CONSEQUENCES
An investment in the Certificates will have state and local tax
consequences. The state and local tax consequences will depend in part upon the
tax laws of jurisdictions where the Certificateholders reside or are doing
business. Certain Mississippi tax implications of an investment in the
Certificates are described below. The tax consequences arising to the
Certificateholders under the laws of other jurisdictions are not discussed
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in this summary. Potential investors should consult their own tax advisers as to
the state and local tax consequences of an investment in the Certificates with
respect to their particular circumstances.
The discussion of Mississippi tax consequences set forth below is based
upon present provisions of the Mississippi statutes and the regulations
promulgated thereunder, and applicable judicial or ruling authority, all of
which are subject to change, which change may be retroactive. No ruling on any
of the issues discussed below will be sought from any Mississippi taxing
authority. Certain activities to be undertaken by the Servicer on behalf of the
Trust pursuant to the Agreement will take place in Mississippi.
If the Certificates are treated for Federal income tax purposes as debt
issued by PCC, this treatment should also apply for Mississippi income tax
purposes. Under such treatment, Certificateholders not otherwise subject to
Mississippi income tax would not become subject to such tax solely because of
their ownership of Certificates. Interest on the Certificates generally would be
taxable to an individual Certificateholder in his state of residence and would
be taxed to a corporate Certificateholder in accordance with the laws of the
jurisdictions in which the corporate Certificateholder is subject to tax.
In the alternative, if the Certificates were treated for Federal income tax
purposes as interests in a partnership (not taxable as a corporation), the same
treatment should also apply for Mississippi income tax purposes. In such case,
the Mississippi State Tax Commission could view the partnership as doing
business in Mississippi. In this circumstance, the partnership would not be an
entity subject to income taxation in Mississippi. However, the partnership's
items of income and deduction would be passed through to resident and
nonresident partners, who would be responsible for any income tax imposed at the
partner level. Consequently, nonresident individual partners could be required
to file Mississippi income tax returns and pay Mississippi income tax on their
distributive share of the partnership's income attributable to Mississippi.
Similarly, corporate partners not otherwise doing business in Mississippi could
be required to file Mississippi income tax returns and pay tax on their
corporate income attributable to Mississippi. Nonetheless, Mississippi tax
counsel to the Transferor and the Servicer is unaware of any circumstances in
which the Mississippi State Tax Commission has sought to require the filing of
Mississippi income tax returns or pay such tax solely as a consequence of the
acquisition or holding by such persons of instruments comparable to the
Certificates.
If the Certificates are instead treated for Federal income tax purposes as
ownership interests in either a publicly traded partnership taxable as a
corporation or an entity classified as an association taxable as a corporation,
the Mississippi treatment should be the same. Assuming this is the case, the
entity would be subject to the Mississippi income tax. The entity-level taxes
could result in reduced distributions to Certificateholders. The
Certificateholders would be taxed on distributions from the Trust in the same
manner as they are taxed on regular corporate dividends and other distributions.
If corporate treatment were to apply, Certificateholders not otherwise subject
to Mississippi tax should not become subject to such tax on distributions from
the Trust solely as a result of their ownership of the Certificates.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (i) employee benefit
plans (as defined in Section 3(3) of ERISA), (ii) plans described in section
4975(e)(1) of the Code, including individual retirement accounts or Keogh plans,
(iii) any entities whose underlying assets include plan assets by reason of a
plan's investment in such entities and (iv) persons who have certain specified
relationships to such plans. Section 406 of ERISA prohibits plans described in
Section 401 of ERISA from engaging in certain transactions with persons who are
"parties in interest" unless a statutory or administrative exemption applies to
the transaction. Section 4975 of the Code prohibits plans described in Section
4975(e)(1) of the Code from engaging in certain transactions with persons who
are "disqualified persons" unless a statutory or administrative exemption
applies. Moreover, based on the reasoning of the United States Supreme Court in
John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86 (1993), an
insurance company's general account may be deemed to include assets of the
employee benefit plans investing in the general account (e.g., through the
purchase of an annuity contract), and the insurance company might be treated as
a party in interest with respect to a plan by virtue of such investment.
89
<PAGE> 94
ERISA also imposes certain duties on persons who are fiduciaries of plans
subject to ERISA. Under ERISA, a person who exercises discretionary authority or
control respecting the management or disposition of the assets of a plan,
renders investment advice or has the authority to render investment advice to a
plan for a fee or other compensation, or has any discretionary authority or
responsibility with respect to the administration of a plan is generally
considered to be a fiduciary of such plan. Fiduciaries, parties in interest and
disqualified persons with respect to employee benefit plans described in Section
401 of ERISA and Section 4975(e)(1) of the Code (collectively, "Benefit Plans"),
may be subject to excise taxes, civil fines and other liabilities for violating
the fiduciary responsibility and prohibited transaction rules of Section 406 of
ERISA and Section 4975 of the Code.
Benefit Plan fiduciaries should determine whether the acquisition and
holding of the Certificates and the operations of the Trust would result in
direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit Plans
that purchase the Certificates are deemed to own an interest in the underlying
assets of the Trust. There may also be an improper delegation of the fiduciary
responsibility to manage Benefit Plan assets if Benefit Plans that purchase the
Certificates are deemed to own an interest in the underlying assets of the
Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of a Benefit Plan, the assets and properties of certain entities
in which a Benefit Plan makes an equity investment could be deemed to be assets
of the Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates, the Trust could be deemed to hold plan assets unless one
of the exceptions under the Final Regulation is applicable to the Certificates
of a Series and the Trust.
The Final Regulation applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Series 1997-2
Certificates are equity interests for purposes of the Final Regulation, the
Final Regulation contains an exception that may apply to the purchase of Series
1997-2 Certificates by a Benefit Plan. Under this exception, the issuer of a
security is not deemed to hold plan assets of a Benefit Plan that purchases the
security so long as the security qualifies as a "publicly-offered security" for
purposes of the Final Regulation. A publicly-offered security is a security that
is (i) freely transferable, (ii) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another and (iii)
either is (A) part of a class of securities registered with the Commission under
Section 12(b) or 12(g) of the Exchange Act or (B) sold to the Benefit Plan as
part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred.
In addition, the Final Regulation generally provides that if equity
participation by "benefit plan investors" in the Certificates is not
significant, the assets of a Benefit Plan holding Certificates of a Series will
not include any of the underlying assets of the Trust. Equity participation by
benefit plan investors is considered significant if immediately after the most
recent acquisition of any equity interest in the Trust, 25% or more of the value
of any class of equity interests in the Trust is held by benefit plan investors.
In performing the percentage calculation, the value of equity interests held by
a person (other than a benefit plan investor) that has discretionary authority
or control with respect to the assets of the Trust or any person that provides
investment advice for a fee (direct or indirect) with respect to such assets or
any affiliate of such persons (as defined in the Final Regulations) is
disregarded. Thus, if such persons purchase Certificates, the 25% threshold will
decrease. For purposes of the Final Regulation, a "benefit plan investor"
includes any employee benefit plan within the meaning of Section 3(3) of ERISA
(whether or not it is subject to ERISA), a plan described in Section 4975(e)(1)
of the Code, and any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity.
90
<PAGE> 95
It is not anticipated that the 25% threshold will be monitored.
Furthermore, because the Offered Certificates are transferable, it is possible
that the 25% threshold will be exceeded at some time in the future. Finally, it
is not anticipated that interests in the Series 1997-2 Certificates will meet
the criteria of publicly-offered securities as set forth above. The underwriters
do not expect (although no assurances can be given) that interests in the
Offered Certificates will be held by at least 100 investors independent of the
issuer and one another on the Closing Date, that there will be no restrictions
imposed on the transfer of interests in the Series 1997-2 Certificates, and that
interests in the Series 1997-2 Certificates will be sold as part of an offering
pursuant to an effective registration statement under the Securities Act and
then will be timely registered under the Exchange Act.
If interests in the Offered Certificates fail to meet the criteria of
publicly-offered securities and the equity participation by benefit plan
investors is significant, the Trust's assets will be deemed to include assets of
Benefit Plans that are Certificateholders. Consequently, transactions involving
the Trust and parties in interest or disqualified persons with respect to such
Benefit Plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code unless an exemption is applicable. In addition, the Transferor or any
underwriter of the Series 1997-2 Certificates may be considered to be a party in
interest, disqualified person or fiduciary with respect to an investing Benefit
Plan. Accordingly, an investment by a Benefit Plan in Series 1997-2 Certificates
may be a prohibited transaction under ERISA and the Code unless such investment
is subject to a statutory or administrative exemption. Thus, for example, if a
participant in any Benefit Plan is a cardholder of one of the Accounts, under
DOL interpretations the purchase of interests in Series 1997-2 Certificates by
such Benefit Plan could constitute a prohibited transaction.
There are five class exemptions issued by the DOL that could apply in such
event: (i) DOL Prohibited Transaction Exemption 84-14 (Class Exemption for Plan
Asset Transactions Determined by Independent Qualified Professional Asset
Managers), (ii) 91-38 (Class Exemption for Certain Transactions Involving Bank
Collective Investment Funds), (iii) 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts), (iv) 95-60
(Class Exemption for Certain Transactions Involving Insurance Company General
Accounts) and, (v) 96-23 (Class Exemption for Certain Transactions Determined by
In-House Asset Managers). There is no assurance that these exemptions, even if
all of the conditions specified therein are satisfied, or any other exemption
will apply to all transactions involving the Trust's assets.
If any Series 1997-2 Certificates are treated as equity interests in a
partnership, a Benefit Plan could have its share of income from the partnership
treated as "unrelated business taxable income" under the Code and thus taxable
to the Benefit Plan. Furthermore, if any Series 1997-2 Certificates were treated
as equity interests in a partnership in which other interests were debt, all or
part of a tax-exempt investor's share of income from the Series 1997-2
Certificates that were treated as equity probably would be treated under the
Code as unrelated debt-financed income taxable to the investor as unrelated
business taxable income.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of interests in Series 1997-2 Certificates should consult their own
counsel as to whether the acquisition of such Series 1997-2 Certificates would
be a prohibited transaction, whether the assets of the Trust which are
represented by such interests would be considered plan assets, and whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in Series 1997-2 Certificates is appropriate for
the Benefit Plan taking into account the overall investment policy of the
Benefit Plan and the composition of the Benefit Plan's investment portfolio. In
addition, fiduciaries should consider the consequences that would apply if the
Trust's assets were considered plan assets, the applicability of exemptive
relief from the prohibited transaction rules, and, whether all conditions for
such exemptive relief would be satisfied.
In addition, insurance companies considering the purchase of the Series
1997-2 Certificates using assets of a general account should consult their own
employee benefits counsel or other appropriate counsel with respect to the
effect of the Small Business Job Protection Act of 1996 which added a new
Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and
91
<PAGE> 96
Section 4975 of the Code. Pursuant to Section 401(c), the DOL is required to
issue final regulations (the "General Account Regulations") not later than
December 31, 1997 with respect to insurance policies issued on or before
December 31, 1998 that are supported by an insurer's general account. The
General Account Regulations are intended to provide guidance on which assets
held by the insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. The plan asset
status of insurance company separate accounts is unaffected by new Section
401(c) of ERISA, and separate account assets continue to be treated as the plan
assets of any such plan invested in a separate account.
92
<PAGE> 97
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Offered Certificates (the "Underwriting Agreement"), the
Transferor has agreed to sell to the underwriters named below (the
"Underwriters"), and the Underwriters have severally agreed to purchase from the
Transferor, the principal amount of Offered Certificates set forth opposite
their respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CLASS A
UNDERWRITERS CERTIFICATES
- ------------ ----------------
<S> <C>
NationsBanc Capital Markets, Inc............................ $
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF CLASS B
CERTIFICATES
----------------
<S> <C>
NationsBanc Capital Markets, Inc............................ $
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of % of the principal amount of the
Class A Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not in excess of % of the principal amount of the Class A
Certificates to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the
Underwriters.
The Underwriter of the Class B Certificates proposes initially to offer the
Class B Certificates to the public at the price set forth on the cover page
hereof and to certain dealers at such price less concessions not in excess of
% of the principal amount of the Class B Certificates. The Underwriter may
allow, and such dealers may reallow, concessions not in excess of % of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriter.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
In addition to the underwriting discount to be paid to the Underwriters as
set forth on the cover page hereto, the Transferor has agreed to reimburse the
Underwriters for their reasonable out-of-pocket costs and expenses incurred in
connection with the offering, including the reasonable fees and disbursements of
Underwriters' counsel.
Until the distribution of the Offered Certificates is completed, the rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriters are
permitted to engage in over-allotment transactions, stabilizing transactions,
syndicate coverage transactions and penalty bids with respect to the Offered
Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the Offered Certificates as long as the stabilizing bids
do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the Offered Certificates in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the Underwriters to reclaim a selling concession from a syndicate member
when the Offered Certificates originally sold by such syndicate member are
purchased in a syndicate covering transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Offered
Certificates to be higher than they would otherwise be in the absence
93
<PAGE> 98
of such transactions. Neither the Transferor nor any of the Underwriters makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Offered
Certificates. In addition, neither the Transferor nor any of the Underwriters
represent that any of the Underwriters will engage in any such transactions or
that such transactions, once commenced, will not be discontinued without notice.
Each Underwriter has represented and agreed that (i) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or who is a person to whom
the document may otherwise lawfully be issued or passed on, (ii) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by it in relation to the Certificates in,
from or otherwise involving the United Kingdom and (iii) if that Underwriter is
an authorized person under the Financial Services Act 1986, it has only promoted
and will only promote (as that term is defined in Regulation 1.02 of the
Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to any
person in the United Kingdom the scheme described herein if that person is of a
kind described either in Section 76(2) of the Financial Services Act 1986 or in
Regulation 1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991.
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial banking
and investment banking and other transactions with the Company and its
affiliates. NationsBank of Texas, N.A., which is an affiliate of NationsBanc
Capital Markets, Inc., ("NCMI") is agent bank and a lender to the Company and
certain of its affiliates under an existing $275 million credit facility that
was amended on June 26, 1997 to increase the amount of such facility to $400
million. NationsBank, N.A., another affiliate of NCMI, is the agent for an
asset-backed commercial paper conduit which will be repaid from the proceeds of
the sale of the Series 1997-1 and Series 1997-2 Certificates. Such conduit is
expected to be a purchaser of the Series 1997-1 Certificates. See "Use of
Proceeds."
The Transferor and the Company will indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered Certificates
and the federal income tax consequences of such issuance will be passed upon for
the Company and the Transferor by Alston & Bird LLP, Atlanta, Georgia. Certain
legal matters relating to the issuance of the Offered Certificates will be
passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
New York, New York.
94
<PAGE> 99
INDEX OF KEY TERMS
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Accounts........................... cover/3
Accumulation Period................ 6
Accumulation Period Factor......... 60
Accumulation Period Length......... 40
Additional Account Cut-Off Date.... 41
Additional Accounts................ 3
Adjusted Investor Amount........... 50
Adjustment......................... 84
Aggregate Automatic Addition
Limit............................ 42
Aggregate Investor Amount.......... 42
Allocable Amount................... 63
Automatic Additional Accounts...... 3/41
Available Cash Collateral Amount... 9/47
Available Enhancement Amount....... 9/60
Available Finance Charge
Collections...................... 4
Available Principal Collections.... 55
Bankruptcy Code.................... 13
Base Rate.......................... 68
Benefit Plans...................... 90
Cash Collateral Account............ 9
Cash Enhancement Surplus........... 47
Cede............................... ii
Cedel.............................. 4
Cedel Participants................. 76
Certificate Owners................. ii/17
Certificate Rate................... 2
Certificateholders................. 2
Certificates....................... 2
Class A Accumulation Period........ 7
Class A Additional Interest........ 54
Class A Adjusted Investor Amount... 49
Class A Adjustment Amount.......... 62
Class A Allocable Amount........... 62
Class A Available Funds............ 55
Class A Certificate Rate........... 3
Class A Certificateholders......... 2
Class A Certificates............... cover/1
Class A Expected Payment Date...... 3
Class A Initial Investor Amount.... 3
Class A Investor Amount............ 3/49
Class A Investor Charge Off........ 63
Class A Investor Default Amount.... 62
Class A Investor Percentage........ 49
Class A Monthly Interest........... 55
Class A Monthly Principal.......... 59
Class A Pool Factor................ 37
Class A Required Amount............ 51
Class A Servicing Fee.............. 69
Class B Accumulation Period........ 7
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Class B Additional Interest........ 54
Class B Adjusted Investor Amount... 50
Class B Adjustment Amount.......... 62
Class B Allocable Amount........... 62
Class B Available Funds............ 55
Class B Certificate Rate........... 3
Class B Certificateholders......... 2
Class B Certificates............... cover/1
Class B Expected Payment Date...... 3
Class B Initial Investor Amount.... 4
Class B Investor Amount............ 4/50
Class B Investor Charge Off........ 64
Class B Investor Default Amount.... 62
Class B Investor Percentage........ 50
Class B Monthly Interest........... 55
Class B Monthly Principal.......... 59
Class B Pool Factor................ 37
Class B Principal Commencement
Date............................. 7
Class B Required Amount............ 51
Class B Servicing Fee.............. 69
Class B Subordinated Principal
Collections...................... 48
Class D Additional Interest........ 57
Class D Adjustment Amount.......... 62
Class D Allocable Amount........... 63
Class D Available Funds............ 55
Class D Certificate Rate........... 56
Class D Certificateholders......... 2
Class D Certificates............... 2
Class D Investor Amount............ 50
Class D Investor Charge Off........ 65
Class D Investor Default Amount.... 62
Class D Investor Percentage........ 51
Class D Monthly Interest........... 56
Class D Monthly Principal.......... 59
Class D Pool Factor................ 37
Class D Servicing Fee.............. 69
Class D Subordinated Principal
Collections...................... 51
Closing Date....................... 3
Code............................... 10
Collateral Additional Interest..... 56
Collateral Adjustment Amount....... 62
Collateral Allocable Amount........ 62
Collateral Amortization Period..... 58
Collateral Available Funds......... 55
Collateral Default Amount.......... 62
Collateral Indebtedness Amount..... 50
Collateral Indebtedness Charge
Off.............................. 64
</TABLE>
95
<PAGE> 100
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Collateral Indebtedness Holder..... 2
Collateral Indebtedness Interest... 2
Collateral Investor Percentage..... 50
Collateral Monthly Interest........ 56
Collateral Monthly Principal....... 59
Collateral Pool Factor............. 37
Collateral Rate.................... 56
Collateral Required Amount......... 52
Collateral Servicing Fee........... 69
Collateral Subordinated Principal
Collections...................... 51
Collection Account................. 9
Commission......................... ii
Company............................ iii/1
Controlled Accumulation Amount..... 59
Controlled Deposit Amount.......... 60
Cooperative........................ 77
Credit Card Guidelines............. 15
Credit Services Center............. 21
Cut-Off Date....................... 40
Debtor Relief Laws................. 32
Default Amount..................... 62
Defaulted Accounts................. 61
Defaulted Receivables.............. 61
Deficit Controlled Accumulation
Amount........................... 60
Definitive Certificates............ 77
Department Stores.................. 1
Depositaries....................... 75
Designated Portfolio............... 5/22
Determination Date................. 61
Discount Option.................... 45
Discount Option Receivable
Collections...................... 45
Discount Option Receivables........ 45
Discount Percentage................ 45
Distribution Date.................. cover
DOL................................ 90
DTC................................ ii
DTC Rules.......................... 76
Eligible Account................... 32
Eligible Originator................ 32
Eligible Receivable................ 32
Enhancement Distribution Amount.... 58
Enhancement Surplus................ 47
ERISA.............................. 10
Euroclear.......................... 4/76
Euroclear Operator................. 76
Euroclear Participants............. 76
Excess Funding Account............. 47
Excess Spread...................... 56
Exchange........................... 72
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Exchange Act....................... ii
Exchangeable Transferor
Certificate...................... 8
FASIT.............................. 74/87
Final Regulation................... 90
Finance Charge Receivables......... 5
Finance Charges.................... 5
Foreign Investor................... 87
General Account Regulations........ 92
Group One.......................... A-1
Herberger's........................ 1
Indirect Participants.............. 75
Ineligible Receivable.............. 42
Initial Investor Amount............ 10
Investor Amount.................... 2
Investor Default Amount............ 62
Investor Monthly Servicing Fee..... 5
Investor Percentage................ 48
IRS................................ 84
Loan Agreement..................... 47
McRae's............................ 1
Minimum Aggregate Principal
Receivables...................... 44
Minimum Transferor Amount.......... 65
Minimum Transferor Interest
Percentage....................... 65
Monthly Period..................... 4
Monthly Servicer Report............ 71
Moody's............................ 45
NCMI............................... 94
Net Recoveries..................... 4
Obligor............................ 32
Offered Certificates............... cover/1
OID................................ 84
OID Regulations.................... 84
over limit charges................. 25
Paired Series...................... 61
Parisian........................... 1
Participants....................... 17
Pay Out Event...................... 67
Paying Agent....................... 46
Payment Date Statement............. 72
PCC................................ cover/1
Permitted Investments.............. 46
Pool Factors....................... 37
Pooling and Servicing Agreement.... cover/2
Portfolio Yield.................... 68
Principal Account.................. 45
Principal Account Balance.......... 49
Principal Receivables.............. 5
Principal Shortfalls............... 66
Proffitt's......................... 1
</TABLE>
96
<PAGE> 101
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Proposed Regulations............... 88
Qualified Institution.............. 45
qualified minimum payment.......... 26
Rapid Amortization Period.......... 3
Rating Agency...................... 45
Rating Agency Condition............ 70
Reallocated Principal
Collections...................... 51
Receivables........................ cover/3
Receivables Purchase Agreements.... 5
Record Date........................ 5
Recoveries......................... 4
Registration Statement............. ii
Relevant UCC State................. 32
Removed Accounts................... 45
Required Accumulation Factor
Number........................... 60
Required Cash Collateral Amount.... 57
Required Enhancement Amount........ 9/60
Reserve Account.................... 46
Reserve Account Funding Date....... 46
Revolving Period................... 6
Securities Act..................... ii
Sellers............................ 2
Selling Subsidiaries............... 78
Series............................. 1
Series 1997-2...................... 1
Series 1997-2 Certificates......... 2
Series 1997-2 Supplement........... 2
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE NO.
- ---- --------
<S> <C>
Series Adjustment Amount........... 65
Series Supplement.................. 1
Servicer........................... cover/1
Service Transfer................... 70
Servicer Default................... 72
Shared Excess Finance Charge
Collections...................... 57/67
Shared Principal Collections....... 66
Shortfall Amount................... 47
Special Tax Counsel................ 84
Standard & Poor's.................. 45
Stated Series Termination Date..... 4
Subservicer........................ cover
Supplement......................... 1
Terms and Conditions............... 77
Transfer Agent and Registrar....... 78
Transfer Date...................... 61
Transferor......................... cover/1
Transferor Amount.................. 8
Transferor Interest................ 2
Transferor Percentage.............. 38
Trust.............................. cover/1
Trustee............................ cover/1
UCC................................ 12
Underwriters....................... 93
Underwriting Agreement............. 93
U.S. Person........................ B-4
</TABLE>
97
<PAGE> 102
ANNEX I -- SERIES PREVIOUSLY ISSUED
PRIOR SERIES ISSUED
The table below sets forth the principal characteristics of the one Series
heretofore issued by the Trust, the Series 1997-1, which is in the same group of
Series ("Group One") as Series 1997-2. For more specific information with
respect to any Series, any prospective investor should contact Proffitt's, Inc.
as Servicer, 3455 Highway 80 West, Jackson, Mississippi 39209; telephone number
(601) 968-4400.
SERIES 1997-1
VARIABLE FUNDING CERTIFICATES
<TABLE>
<S> <C>
Initial Investor Amount.....................................
Investor Amount as of , 1997....................
Expected Investor Amount at end of Closing Date.............
Certificate Rate............................................
Expected Final Distribution Date............................
Enhancement.................................................
</TABLE>
A-1
<PAGE> 103
ANNEX II -- GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Proffitt's
Credit Card Master Trust Asset Backed Certificates (the "Global Securities") to
be issued in Series from time to time (each, a "Series") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede, as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as
Participants and Indirect Participants in DTC. As a result, Cedel and Euroclear
will hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations. Investor
securities custody accounts will be credited with their holdings against payment
in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the
B-1
<PAGE> 104
respective Depositary, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date. Payment will then be made by the respective Depositary to the DTC
Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Cedel Participant's or Euroclear Participant's account.
The Global Securities credit will appear the next day (European time) and the
cash debit will be back-valued to, and the interest on the Global Securities
will accrue from, the value date (which would be the preceding day when
settlement occurred in New York). If settlement is not completed on the intended
value date (i.e., the trade fails), the Cedel or Euroclear cash debit will be
valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow the credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. The payment will then
be reflected in the account of the Cedel Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the Cedel Participant's
or Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
Cedel Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date. Finally, day traders
that use Cedel or Euroclear and that purchase Global Securities from DTC
Participants for delivery to Cedel Participants or Euroclear Participants should
note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
B-2
<PAGE> 105
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate of non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of
a Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom
it holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
B-3
<PAGE> 106
============================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
INCORPORATED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, PCC, THE TRUST
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY, PCC, THE TRUST OR THE RECEIVABLES OR THE ACCOUNTS SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders............... ii
Available Information....................... ii
Incorporation of Certain Documents by
Reference................................. iii
Cautionary Notice Regarding Forward-Looking
Statements................................ iii
Prospectus Summary.......................... 1
Risk Factors................................ 12
Credit Card Program......................... 20
Composition of the Designated Portfolio..... 29
The Accounts................................ 32
The Trust................................... 33
PCC......................................... 33
The Company................................. 34
Use of Proceeds............................. 34
Maturity Assumptions........................ 34
Receivables Yield Considerations............ 36
Pool Factors................................ 37
Description of the Series 1997-2
Certificates and the Pooling and Servicing
Agreement................................. 37
Description of the Receivables Purchase
Agreements................................ 78
Certain Legal Aspects of the Receivables.... 80
Federal Income Tax Consequences............. 84
State and Local Tax Consequences............ 88
ERISA Considerations........................ 89
Underwriting................................ 93
Legal Matters............................... 94
Index of Key Terms.......................... 95
Annex I -- Series Previously Issued......... A-1
Annex II -- Global Clearance, Settlement and
Tax Documentation Procedures.............. B-1
</TABLE>
------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================
============================================================
PROFFITT'S
CREDIT CARD MASTER TRUST
$ % SERIES 1997-2
CLASS A CERTIFICATES
$ % SERIES 1997-2
CLASS B CERTIFICATES
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
Servicer
---------------------------
PROSPECTUS
---------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
UNDERWRITER OF THE CLASS B CERTIFICATES
NATIONSBANC CAPITAL MARKETS, INC.
DATED , 1997
============================================================
<PAGE> 107
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of issuance and distribution of the Asset Backed
Securities, other than underwriting discounts, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ *
National Association of Securities Dealers, Inc. Filing
Fee....................................................... --
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Printing and Engraving...................................... *
Blue Sky Fees and Expenses.................................. *
Miscellaneous............................................... 10,000
Total.............................................
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of Proffitt's Credit Corporation include the
following provisions regarding indemnification:
(a) Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, or is
or was serving at the request of the Corporation as a director (including
an Independent Director), officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the Corporation to the fullest extent
legally permissible under the General Corporation Law of the State of
Delaware, as amended from time to time, against all expenses, liabilities
and losses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding.
(b) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraph (a) of this Article
XV, or in defense of any claim, issue or matter therein, he shall be
indemnified by the Corporation against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith without the
necessity of any action being taken by the Corporation other than the
determination, in good faith, that such defense has been successful. In all
other cases wherein indemnification is provided by this Article XV, unless
ordered by a court, indemnification shall be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct
specified in this Article XV. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or
(iii) by the holders of a majority of the shares of capital stock of the
Corporation entitled to vote thereon.
(c) The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
seeking indemnification did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Entry of a
judgment by
II-1
<PAGE> 108
consent as part of a settlement shall not be deemed a final adjudication of
liability for negligence or misconduct in the performance of duty, nor of
any other issue or matter.
(d) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
finial disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount unless is
shall ultimately be determined that he is entitled to be indemnified by the
Corporation. Expenses (including attorneys' fees) incurred by other
employees or agents of the Corporation in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by
the Corporation upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
(e) No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extent provided by applicable law (i) for breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Nevada Revised
Statutes Section 78 300 or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this
Section (e) shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment.
(f) The indemnification and advancement of expenses provided by this
Article XV shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits.
<TABLE>
<S> <C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation of Proffitt's Credit
Corporation.**
3.2 -- By-laws of Proffitt's Credit Corporation.**
4.1 -- Form of Master Pooling and Servicing Agreement by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's
Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee.
4.2 -- Form of Series 1997-2 Supplement, including Form of Series
1997-2 Class A Certificate and Series 1997-2 Class B
Certificate.
4.3 -- Form of Receivables Purchase Agreement*
5.1 -- Opinion and consent of Alston & Bird LLP with respect to
legality.*
8.1 -- Opinion and consent of Alston & Bird LLP with respect to
Federal income tax matters.*
23.1 -- Consent of Alston & Bird LLP (included in its opinion filed
as Exhibit 5.1).*
23.2 -- Consent of Alston & Bird LLP (included in its opinion filed
as Exhibit 8.1).*
24.1 -- Powers of Attorney.**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed with the Registrant's Registration Statement on Form S-3
(File No. 333-28811) on June 9, 1997.
II-2
<PAGE> 109
(b) Financial Statements
All financial schedules of Proffitt's Credit Corporation, Proffitt's,
Inc. and its subsidiaries have been omitted as they are not required under
the related instructions or are inapplicable.
ITEM 17. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the act and will
be governed by the final adjudication of such issue.
2. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has caused this Pre-Effective Amendment No. 1 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Birmingham, State of Alabama, on this 23rd day
of July 1997.
PROFFITT'S CREDIT CORPORATION
By: /s/ DOUGLAS E. COLTHARP
------------------------------------
Name: Douglas E. Coltharp
Title: President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registrant's Registration Statement has been signed by the following
persons in the capacities and on July 23, 1997.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ DOUGLAS E. COLTHARP President
- ----------------------------------------------------- (Principal Executive Officer)
Douglas E. Coltharp
* Vice President, Treasurer and Assistant
- ----------------------------------------------------- Secretary
James S. Scully (Principal Financial Officer)
* Senior Vice President and Assistant Secretary
- ----------------------------------------------------- (Principal Accounting Officer)
Donald E. Wright
* Director
- -----------------------------------------------------
Monte L. Miller
* Director
- -----------------------------------------------------
Andrew L. Stidd
* Director
- -----------------------------------------------------
Kevin P. Burns
*By: /s/ DOUGLAS E. COLTHARP
------------------------------------------------
Douglas E. Coltharp
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 111
EXHIBIT INDEX
<TABLE>
<CAPTION>
S-K
REFERENCE
NUMBER DESCRIPTION
- --------- -----------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation of Proffitt's Credit
Corporation.**
3.2 -- By-laws of Proffitt's Credit Corporation.**
4.1 -- Form of Master Pooling and Servicing Agreement by and among
Proffitt's Credit Corporation, as Transferor, Proffitt's
Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee.
4.2 -- Form of Series 1997-2 Supplement, including Form of Series
1997-2 Class A Certificate and Series 1997-2 Class B
Certificate.
4.3 -- Form of Receivables Purchase Agreement*
5.1 -- Opinion and consent of Alston & Bird LLP with respect to
legality.*
8.1 -- Opinion and consent of Alston & Bird LLP with respect to
Federal income tax matters.*
23.1 -- Consent of Alston & Bird LLP (included in its opinion filed
as Exhibit 5.1).*
23.2 -- Consent of Alston & Bird LLP (included in its opinion filed
as Exhibit 8.1).*
24.1 -- Powers of Attorney.**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed with the Registrant's Registration Statement on Form S-3
(File No. 333-28811) on June 9, 1997.
<PAGE> 1
EXHIBIT 1.1
FORM OF
PROFFITT'S CREDIT CORPORATION, as TRANSFEROR
PROFFITT'S CREDIT CARD MASTER TRUST
JULY __, 1997
UNDERWRITING AGREEMENT
----------------------
(STANDARD TERMS)
<PAGE> 2
NationsBanc Capital Markets, Inc.,
As Representative
(the "Representative") of the
Several Underwriters,
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
1. Introductory. Proffitt's Credit Corporation (the "Transferor")
proposes to form a master trust entitled the Proffitt's Credit Card Master
Trust (the "Trust"), which will issue, from time to time, asset backed
securities ("Securities") in one or more series (each, a "Series"). Each
Security will evidence a fractional, undivided percentage interest in the
Trust. The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of credit card accounts owned by
certain affiliates of the Transferor (the "Accounts"), collections thereon and
certain related property to be conveyed to the Trust by the Transferor (the
"Trust Property").
The Transferor proposes to enter into the Pooling and Servicing
Agreement, dated as of ________, 1997 (the "Pooling and Servicing Agreement")
among the Transferor, Norwest Bank Minnesota, National Association, a national
banking association (the "Trustee") and Proffitt's Inc., as servicer (the
"Servicer"). The Transferor proposes to enter into the Series 1997-2
Supplement, dated as of ________, 1997 (the "Series 1997-2 Supplement"), to the
Pooling and Servicing Agreement, pursuant to which $_______ aggregate initial
principal amount of __% Class A Asset Backed Certificates, Series 1997-2 (the
"Class A Certificates"), $__________ aggregate initial principal amount of __%
Class B Asset Backed Certificates, Series 1997-2 (the "Class B Certificates,"
and together with the Class A Certificates, the "Certificates"), a Collateral
Indebtedness Interest, Series 1997-2 in the initial aggregate principal amount
of $________ (the "Collateral Interest") and $________ initial aggregate
principal amount of Class D Asset Backed Certificates, Series 1997-2 (the
"Class D Certificates"). To the extent not defined herein, capitalized terms
used herein shall have the meanings specified in the Pooling and Servicing
Agreement and the Supplement.
<PAGE> 3
The Transferor proposes to sell to the underwriters identified on
Schedule I hereto (the "Underwriters") for whom you are acting as
representative (the "Representative") the principal amount of Certificates
identified on Schedule I. The Collateral Interest will be sold to the
Enhancement Provider (as defined herein) pursuant to the Loan Agreement, to be
dated as of the Closing Date (as defined in Section 3 hereof), among the
Transferor, the Trustee and the financial institution named therein (the
"Enhancement Provider") (such agreement, the "Enhancement Agreement").
2. Representations and Warranties of the Transferor. The Transferor
represents and warrants to each Underwriter as of the date hereof, as follows:
(a) a registration statement on Form S-3 (having the registration
number 333______) including a prospectus and such amendments thereto as
may have been required to the date hereof, relating to the Certificates
has been filed with the Securities and Exchange Commission (the
"Commission") (which included a preliminary prospectus (the "Preliminary
Prospectus") meeting the requirements of Rule 430 of the Securities Act
as 1933, as amended (the "Act"), and such registration statement, as
amended, has become effective; such registration statement, as amended,
and the prospectus relating to the sale of the Certificates offered
thereby by the Transferor constituting a part thereof, as from time to
time amended or supplemented (including any prospectus filed with the
Commission pursuant to Rule 424(b) of the rules and regulations of the
Commission (the "Rules and Regulations") under the Act), are respectively
referred to herein as the "Registration Statement" and the "Prospectus";
and the conditions to the use of a registration statement on Form S-3
under the Act, as set forth in the General Instructions to Form S-3, have
been satisfied with respect to the Registration Statement;
(b) as of the date of execution of this Agreement, the Registration
Statement and the Prospectus, except with respect to any modification to
which you have agreed in writing, shall be in all substantive respects in
the form furnished to you prior to such date or, to the extent not
completed on such date, shall contain only such specific additional
information and other changes (beyond that contained in the latest
Preliminary Prospectus that has previously been furnished to you) as the
Transferor has advised you, prior to such time will be included or made
therein;
(c) on the effective date of the Registration Statement, the
Registration Statement and the Prospectus complied in all material
respects with the applicable requirements of the Act and the Rules and
Regulations, and did not include any untrue statement of a material fact
or, in the case of the Registration Statement, omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading and, in the case of the Prospectus, omit to state
any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and on the
date hereof
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<PAGE> 4
and on the Closing Date (as defined in Section 3 hereof), the
Registration Statement and the Prospectus will comply in all material
respects with the applicable requirements of the Act and the Rules and
Regulations, and neither of such documents included or will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the foregoing does not apply to
information contained in or omitted from either of the documents based
upon written information furnished to the Transferor by any Underwriter
specifically for use in connection with the preparation of the
Registration Statement or the Prospectus;
(d) the Transferor is a corporation duly organized and validly
existing in good standing under the laws of the state of Nevada, with
full power, authority and legal right to own its properties and conduct
its business as described in the Prospectus, is duly qualified to do
business and is in good standing (or is exempt from such requirements),
and has obtained all necessary licenses and approvals (except with
respect to the state securities or Blue Sky laws of various
jurisdictions) in each jurisdiction in which failure to so qualify or
obtain such licenses and approvals would have a material adverse effect
on the interests of Certificateholders under the Pooling and Servicing
Agreement or under the Supplement;
(e) the Certificates, the Collateral Interest and the Class D
Certificates on the date of this Agreement, will have been duly and
validly authorized and, when the Certificates and the Class D
Certificates are duly and validly executed by or on behalf of the
Transferor, authenticated by the Trustee and delivered in accordance with
the Pooling and Servicing Agreement and the Supplement and, when the
Certificates, the Collateral Interest and the Class D Certificates are
delivered and paid for as provided herein, will be validly issued and
outstanding and entitled to the benefits and security afforded by the
Pooling and Servicing Agreement and the Supplement;
(f) the execution, delivery and performance by the Transferor of
this Agreement, any applicable agreement relating to an Enhancement (an
"Enhancement Agreement"), the Pooling and Servicing Agreement, the
Supplement and the Certificates, the Collateral Interest and the Class D
Certificates, and the consummation by the Transferor of the transactions
provided for herein and therein, have been, or will have been, duly
authorized by the Transferor by all necessary action on the part of the
Transferor; and neither the execution and delivery by the Transferor of
such instruments, nor the performance by the Transferor of the
transactions herein or therein contemplated, nor the compliance by the
Transferor with the provisions hereof or thereof, will (i) conflict with
or result in a breach of any of the terms and provisions of, or
constitute a default under, any of the provisions of the articles of
association or by-laws of the Transferor, or (ii) conflict with any of
the provisions of any law, government rule,
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<PAGE> 5
regulation, judgment, decree or order binding on the Transferor or its
properties or (iii) conflict with any of the provisions of any indenture,
mortgage, contract or other instrument to which the Transferor is a party
or by which it is bound or (iv) result in the creation or imposition of
any lien, charge or encumbrance upon any of its property pursuant to the
terms of any such indenture, mortgage, contract or other instrument;
(g) when executed and delivered by the parties thereto, the Pooling
and Servicing Agreement, the Supplement and the Enhancement Agreement
will each constitute a legal, valid and binding agreement of the
Transferor, enforceable against the Transferor in accordance with its
terms, except to the extent that the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights in general and to general principles
of equity;
(h) all approvals, authorizations, consents, orders or other actions
of any person, corporation or other organization, or of any court,
governmental agency or body or official (except with respect to the state
securities or Blue Sky laws of various jurisdictions), required in
connection with the valid and proper authorization, issuance and sale of
the Certificates the Collateral Interest and the Class D Certificates
pursuant to this Agreement, the Enhancement Agreement, the Pooling and
Servicing Agreement and the Supplement, have been or will be taken or
obtained on or prior to the Closing Date;
(i) this Agreement has been duly executed and delivered by the
Transferor;
(j) except as set forth in or contemplated in the Registration
Statement and the Prospectus, there has been no material adverse change
in the condition (financial or otherwise) of the Transferor since
__________________;
(k) any taxes, fees and other governmental charges in connection
with the execution, delivery and performance by the Transferor of this
Agreement, the Pooling and Servicing Agreement, the Supplement, the
Enhancement Agreement and the Certificates shall have been paid or will
be paid by or on behalf of the Transferor at or prior to the Closing Date
to the extent then due; and
(l) the Certificates, the Collateral Interest, the Class D
Certificates, the Pooling and Servicing Agreement, the Supplement and the
Enhancement Agreement conform in all material respects to the description
thereof in the Prospectus.
3. Purchase, Sale and Delivery of Certificates. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Transferor agrees to sell to each
Underwriter, and each
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<PAGE> 6
Underwriter agrees, severally and not jointly, to purchase from the Transferor,
the principal amount of the Certificates set forth opposite each Underwriter's
name in Schedule I hereto at the purchase price of _____% of the principal
amount of such Certificates with respect to the Class A Certificates and
_________% of the principal amount of such Certificates with respect to the
Class B Certificates, plus, in each case, accrued interest, if any, from and
including August __, 1997 through and including the day prior to the Closing
Date.
Delivery of and payment for the Certificates will be made at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New
York 10022, on August __, 1997 (the "Closing Date"), or at such other time
thereafter or other place as you and the Transferor shall agree upon. Delivery
of such Certificates shall be made by the Transferor to the Representative for
the respective accounts of the several Underwriters against payment by the
several Underwriters, through the Representative of the purchase price thereof
by one or more wires of immediately available funds to an account designated by
the Transferor. Delivery of the Certificates shall be made through the
facilities of The Depository Trust Company ("DTC"). The Certificates so to be
delivered shall be global certificates registered in the name of Cede & Co., as
nominee for DTC. The number and denomination of definitive certificates so
delivered shall be specified by DTC.
4. Offering by Underwriter. It is understood that several Underwriters
propose to offer the Certificates subject to this Agreement for sale to the
public as set forth in the Prospectus.
5. Covenants of the Transferor. The Transferor hereby covenants and
agrees with each Underwriter that:
(a) prior to the execution of this Agreement, the Transferor will
prepare a Prospectus setting forth the amount of Certificates and the
terms thereof, the price at which such Certificates are to be purchased
by the Underwriters from the Transferor, either the initial public
offering price or the method by which the price at which the Certificates
are to be sold will be determined, the selling concessions and
allowances, if any, and such other information as the Transferor deems
appropriate in connection with the offering of the Certificates, but the
Transferor will not file any amendments to the Registration Statement as
in effect with respect to the Certificates, or any amendments or
supplements to the Prospectus, unless it shall first have delivered
copies of such amendments or supplements to you, or if you shall have
reasonably objected thereto promptly after receipt thereof; the
Transferor will immediately advise you and your counsel (i) when notice
is received from the Commission that any post-effective amendment to the
Registration Statement has become or will become effective and (ii) of
any order or communication suspending or preventing, or threatening to
suspend or prevent, the offer and sale of the Certificates or of any
proceedings or examinations that may lead to such an order or
communication, whether by or of
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<PAGE> 7
the Commission or any authority administering any state securities or
Blue Sky law, as soon as practicable after the Transferor is advised
thereof, and will use every reasonable effort both to prevent the
issuance of any such order or communication and to obtain as soon as
possible its lifting, if issued;
(b) if, at any time when the Prospectus is required to be delivered
under the Act, any event occurs as a result of which the Prospectus as
then amended or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or
supplement the Prospectus to comply with the Act or the Rules and
Regulations, the Transferor will promptly prepare and (subject to review
and no reasonable objection by you as described in Section 5(a) hereof)
file with the Commission an amendment or supplement that will correct
such statement or omission or an amendment that will effect such
compliance and, within two Business Days thereafter, furnish to you as
many copies of the Prospectus as amended or supplemented as you may
reasonably request; provided, however, that your consent to any amendment
shall not constitute a waiver of any of the conditions of Section 6
hereof;
(c) the Transferor will make generally available to the holders of
the Certificates (the "Certificateholders"), in each case as soon as
practicable, a statement which will satisfy the provisions of Section
11(a) of the Act and Rule 158 of the Commission with respect to the
Certificates;
(d) the Transferor will furnish to each Underwriter copies of the
Registration Statement (at least one copy to be delivered to each
Underwriter will be signed and will include all documents and exhibits
thereto or incorporated by reference therein) and all amendments thereto
and, so long as delivery of a Prospectus by an Underwriter dealer may
required by the Act, the Prospectus, and all amendments thereto and
supplements thereto, in each case as soon as available and in such
quantities as you reasonably request;
(e) the Transferor will assist you in arranging for the
qualification of the Certificates for sale and the determination of their
eligibility for investment under the laws of such jurisdictions as you
designate and will continue to assist you in maintaining such
qualifications in effect so long as required for the distribution and
will file or cause to be filed such statements and reports with respect
to the distribution as may be required by the laws of each jurisdiction
in which the Certificates have been qualified as provided above;
provided, however, that neither the Transferor nor the Trust shall be
required to qualify to do business in any jurisdiction where it is now
not qualified or to take any action which would subject it to general or
unlimited service of process in any jurisdiction in which it is now not
subject to service of process;
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<PAGE> 8
(f) except as otherwise specified in this Agreement, the Transferor
will pay all expenses incident to the performance of its obligations
under this Agreement and will reimburse the Underwriters for any expenses
reasonably incurred by them in connection with qualification of the
Certificates and determination of their eligibility for investment under
the laws of such jurisdictions as you may designate (including reasonable
fees and disbursements of the Underwriters' counsel) and the printing of
memoranda relating thereto, for any fees charged by investment rating
agencies for the rating of such Certificates and, to the extent
previously agreed upon with you, for expenses incurred in distributing
the Prospectus (including any amendments and supplements thereto) to the
Underwriters; and
(g) the Transferor will, for so long as Certificates purchased
pursuant hereto remain outstanding, deliver or cause to be delivered to
you copies of the annual servicer's certificate and the annual
accountants' reports delivered to the Trustee pursuant to the Pooling and
Servicing Agreement.
6. Conditions to the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of
the Transferor herein as of the date hereof and the Closing Date, to the
accuracy of the statements of the Transferor made pursuant to the provisions
hereof, to the performance by the Transferor in all material respects of its
obligations hereunder and to the following additional conditions precedent:
(a) you shall have received a letter from [_____________],
independent public accountants, and, if requested by you, a letter from
such accountants, dated the Closing Date, each in the forms heretofore
agreed to;
(b) all actions required to be taken and all filings required to be
made by the Transferor under the Act prior to the Closing Date for the
Certificates shall have been duly taken or made; and prior to the Closing
Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose
shall have been instituted or, to the knowledge of the Transferor,
threatened by the Commission;
(c) the Certificates offered by means of the Registration Statement
shall be rated at the time of issuance, in the case of the Class A
Certificates, in the highest rating category by Moody's Investors
Service, Inc. ("Moodys") and Standard & Poor's Rating Group ("Standard &
Poor's") and in the case of the Class B Certificates, in one of the three
highest rating categories by Moody's and Standard and Poor's, and in each
case shall not have been placed on any credit watch with a negative
implication for downgrade;
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<PAGE> 9
(d) you shall have received an opinion of Alston & Bird LLP,
counsel to the Transferor, dated the Closing Date, substantially to the
effect that:
(i) the Transferor is a corporation association duly
organized, validly existing and in good standing under the laws of
the state of Nevada, with full power and authority to own its
assets and operate its business as described in the Prospectus,
and had at all relevant times and now has, the power, authority
and legal right to acquire, own and service the Receivables
transferred or proposed to be transferred to the Trust as
described in the Prospectus;
(ii) the Transferor has full power and authority to sign the
Registration Statement and to execute and deliver this Agreement,
the Enhancement Agreement, the Receivable Purchase Agreements, the
Pooling and Servicing Agreement and the Supplement and to
consummate the transactions contemplated herein and therein;
(iii) the agreements referred to in clause (ii) above have
been authorized by all necessary action on the part of the
Transferor and have been duly executed and delivered by the
Transferor;
(iv) the Certificates have been duly authorized by all
necessary action of the Transferor;
(v) this Agreement, the Enhancement Agreement, the Receivable
Purchase Agreements, the Pooling and Servicing Agreement and the
Supplement each constitutes the legal, valid and binding agreement
of the Transferor, enforceable against the Transferor in
accordance with its terms, subject, as to enforcement, to (A) the
effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, conservatorship, receivership, or
other similar laws of general applicability relating to or
affecting creditors' rights generally (B) the application of
general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law) and (C) the
unenforceability under certain circumstances of provisions
indemnifying a party against liability where such indemnification
is contrary to public policy;
(vi) no consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required under applicable law for the consummation of the
transactions contemplated herein, the Receivable Purchase
Agreements, the Pooling and Servicing Agreement, the Supplement,
or the Enhancement Agreement, except such as have been obtained or
made and such as may be required under state securities or Blue
Sky laws;
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<PAGE> 10
(vii) the execution, delivery and performance by the
Transferor of its obligations under this Agreement, the Receivable
Purchase Agreements, the Pooling and Servicing Agreement, the
Supplement or the Enhancement Agreement, the transfer of the
Receivables to the Trust, the issuance and sale of the
Certificates, and the consummation of any other of the
transactions contemplated herein, in the Receivable Purchase
Agreements, the Pooling and Servicing Agreement, the Supplement or
the Enhancement Agreement, will not conflict with, result in a
breach of or violation of any of the terms of, or constitute a
default under, the articles of association or by-laws of the
Transferor, each as amended, the terms of any indenture or other
agreement or instrument known to such counsel to which the
Transferor is a party or by which it or its properties are bound
or any rule, order known to such counsel, statute or regulation,
of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Transferor;
provided, however, that such counsel need express no opinion as to
state securities or Blue Sky laws;
(viii) except as otherwise disclosed in the Prospectus or the
Registration Statement, to the best of such counsel's knowledge
(after reasonable investigation), there are no actions,
proceedings or investigations pending or threatened before any
court, administrative agency or other tribunal (A) asserting the
invalidity of this Agreement, the Receivable Purchase Agreements,
the Pooling and Servicing Agreement, the Supplement, the
Enhancement Agreement or the Certificates, (B) seeking to prevent
the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Receivable
Purchase Agreements, the Pooling and Servicing Agreement, the
Supplement, the Enhancement Agreement or the Certificates, which
if adversely determined would materially and adversely affect the
performance by the Transferor of its obligations under, or the
validity or enforceability of, this Agreement, the Receivable
Purchase Agreements, the Pooling and Servicing Agreement, the
Supplement, the Enhancement Agreement or the Certificates, or (C)
seeking adversely to affect the federal income tax attributes of
the Certificates as described in the Prospectus under the headings
"Federal Income Tax Consequences";
(ix) the Registration Statement has become effective under
the Act; to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or threatened under the Act; and the Registration
Statement and the Prospectus (other than the financial, numerical
and statistical information contained therein as to which such
counsel need express no opinion) as of their respective effective
date or date of issuance complied as to form in all material
respects with
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<PAGE> 11
the requirements of the Act and the rules and regulations
promulgated thereunder;
(x) this Agreement, the Receivable Purchase Agreements, the
Pooling and Servicing Agreement, the applicable Supplement, any
Enhancement Agreement and the Certificates conform in all material
respects to the descriptions thereof contained in the Registration
Statement and the Prospectus;
(xi) the Pooling and Servicing Agreement and the Supplement
will not be required to be qualified under the Trust Indenture Act
of 1939, as amended, and neither the Transferor nor the Trust is
now, and immediately following the sale of the Certificates
pursuant hereto will be, required to be registered under the 1940
Act;
(xii) the statements in the Prospectus under the heading
"Federal Income Tax Consequences" to the extent they constitute
matters of Federal law or legal conclusions with respect thereto,
have been reviewed by such counsel and are correct in all material
respects; and
(xiii) the statements in the Prospectus under the headings
"Certain Legal Aspects of the Receivables" and "ERISA
Considerations," to the extent they constitute matters of Federal
law or legal conclusions with respect thereto, have been reviewed
by such counsel and are correct in all material respects;
Such counsel also shall state that, subject to its customary
practices and limitations relating to the scope of such counsel's
participation in the preparation of the Registration Statement and the
Prospectus and its investigation or verification of information contained
therein, it has no reason to believe that at its effective date the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus on the
Closing Date includes any untrue statement of a material fact or omits to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (in each case, other
than financial, numerical and statistical information contained therein as to
which such counsel need express no opinion); in rendering such opinion, such
counsel may rely as to matters of fact, to the extent deemed proper and as
stated therein, on certificates of responsible officers of the Transferor, the
Servicer and public officials;
(e) you shall have received an opinion of Alston & Bird LLP,
special counsel for the Sellers, dated the Closing Date, in form and
substance satisfactory to you and your counsel, to the effect that, with
respect to each Seller:
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<PAGE> 12
(i) the Seller is a corporation or association duly
organized, validly existing and in good standing under the laws of
the state of its incorporation, with full power and authority to
own its assets and operate its business as described in the
Prospectus, and had at all relevant times and now has, the power,
authority and legal right to acquire, own and service the
Receivables transferred or proposed to be transferred to the
Transferor as described in the Prospectus;
(ii) the Seller has full power and authority to execute and
deliver the Receivable Purchase Agreement to which it is a party
and to consummate the transactions contemplated therein;
(iii) the execution, delivery and performance of Receivable
Purchase Agreement to which the Seller is a party has been
authorized by all necessary action on the part of the Seller and
such agreement has been duly executed and delivered by the Seller;
(iv) the Receivable Purchase Agreement to which the Seller is
a party constitutes the legal, valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its
terms, subject, as to enforcement, to (A) the effect of
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, conservatorship, receivership, or other similar laws
of general applicability relating to or affecting creditors'
rights generally, (B) the application of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (C) the unenforceability under
certain circumstances of provisions indemnifying a party against
liability where such indemnification is contrary to public policy;
(v) no consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required under applicable law for the consummation of the
transactions contemplated by the Receivable Purchase Agreement to
which the Seller is a party, except such as have been obtained or
made;
(vi) the execution, delivery and performance by the Seller of
its obligations under the Receivable Purchase Agreement to which
it is a party, the transfer of the Receivables to the Trust, the
sale of the Receivables purported to be sold thereunder, and the
consummation of any other of the transactions contemplated in such
agreement, will not conflict with, result in a breach of or
violation of any of the terms of, or constitute a default under,
the articles of association or by-laws of the Seller, each as
amended, the terms of any indenture or other agreement or
instrument known to such counsel to which the Seller is a party or
by which it or its properties are bound or any rule, order known
to such counsel, statute or
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<PAGE> 13
regulation, of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Seller; and
(vii) except as otherwise disclosed in the Prospectus or the
Registration Statement, to the best of such counsel's knowledge
(after reasonable investigation), there are no actions,
proceedings or investigations pending or threatened before any
court, administrative agency or other tribunal (A) asserting the
invalidity of the Receivable Purchase Agreement to which the
Seller is a party, (B) seeking to prevent the consummation of any
of the transactions contemplated by such agreement, which if
adversely determined would materially and adversely affect the
performance by the Seller of its obligations under, or the
validity or enforceability of, such agreement, or (C) seeking
adversely to affect the federal income tax attributes of the
Certificates as described in the Prospectus under the headings
"Federal Income Tax Consequences".
(f) you shall have received an opinion of Alston & Bird LLP,
counsel for the Servicer, dated the Closing Date, substantially to the
effect that:
(i) the Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the state of
Tennessee, with full power and authority to own its assets and
operate its business as described in the Prospectus, and had at
all relevant times and now has, the power, authority and legal
right to service the Receivables transferred or proposed to be
transferred to the Trust as described in the Prospectus;
(ii) the Servicer has full power and authority to execute and
deliver the Pooling and Servicing Agreement, the Supplement and
the indemnification agreement between you and the Servicer, dated
August __, 1997 (the "Indemnification Agreement") and to
consummate the transactions contemplated herein and therein;
(iii) the agreements referred to in clause (ii) above have
been authorized by all necessary action on the part of the
Servicer and have been duly executed and delivered by the
Servicer;
(iv) the Pooling and Servicing Agreement and the Supplement
each constitutes the legal, valid and binding agreement of the
Servicer, enforceable against the Servicer in accordance with its
terms, subject, as to enforcement, to (A) the effect of
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, conservatorship, receivership, or other similar laws
of general applicability relating to or affecting creditors'
rights generally, (B) the application of general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and (C) the unenforceability under
certain circumstances of
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<PAGE> 14
provisions indemnifying a party against liability where such
indemnification is contrary to public policy;
(v) no consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required under applicable laws for the consummation of the
transactions contemplated herein, the Pooling and Servicing
Agreement or the Indemnification Agreement, except such as have
been obtained or made and such as may be required under state
securities or Blue Sky laws;
(vi) the execution, delivery and performance by the Servicer
of its obligations under the Pooling and Servicing Agreement, the
Supplement or the consummation of any other of the transactions
contemplated by the Pooling and Servicing Agreement, the
Supplement or the Indemnification Agreement, will not conflict
with, result in a breach of or violation of any of the terms of,
or constitute a default under, the articles of association or
by-laws of the Servicer, each as amended, the terms of any
indenture or other agreement or instrument known to such counsel
to which the Servicer is a party or by which it or its properties
are bound or any rule, order known to such counsel, statute or
regulation, of any court, regulatory body, administrative agency
or governmental body having jurisdiction over the Servicer;
provided, however, that such counsel need express no opinion as to
state securities or Blue Sky laws;
(g) you shall have received an opinion or opinions of Alston & Bird
LLP, special counsel for the Sellers and the Transferor, dated the
Closing Date, in form and substance satisfactory to you and your counsel,
with respect to certain matters relating to the sale of the Receivables
by the Sellers and the transfer of the Receivables by the Transferor,
with respect to the perfection of the Transferor's and the Trust's
interest in the Receivables and with respect to other related matters in
a form previously approved by you and your counsel; in addition, you
shall have received a reliance letter with respect to any opinion that
the Transferor is required to deliver to the Rating Agency;
(h) you shall have received from Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, in form and substance satisfactory to you, with
respect to the validity of the Certificates, the Registration Statement,
the Prospectus and other related matters as you may require, and the
Transferor shall have furnished to such counsel such documents as they
may reasonably request for the purpose of enabling them to pass upon such
matters;
(i) you shall have received, with respect to the Transferor, a
certificate, dated the Closing Date, of a Senior Vice President or more
senior officer of the Transferor in which such officer, to the best of
his or her knowledge after
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<PAGE> 15
reasonable investigation, shall state that (A) the representations and
warranties of the Transferor in this Agreement are true and correct in
all material respects on and as of the Closing Date, (B) the Transferor
has complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date, (C) the Registration Statement has become
effective, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are threatened by the Commission and (D) subsequent to the
date of the Prospectus, there has been no material adverse change in the
condition (financial or otherwise) of the Transferor except as set forth
in or contemplated in the Registration Statement and the Prospectus or as
described in such certificate;
(j) you shall have received, with respect to Proffitt's Inc.
("Proffitt's"), a certificate, dated the Closing Date, of a Senior Vice
President or more senior officer of Proffitt's in which such officer, to
the best of his or her knowledge after reasonable investigation, shall
state that subsequent to the date of the Prospectus, there has been no
material adverse change in the condition (financial or otherwise) of
Proffitt's except as set forth in or contemplated in the Registration
Statement and the Prospectus or as described in such certificate;
(k) you shall have received an opinion of Chapman and Cutler,
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to you and your counsel, to the effect that:
(i) the Trustee has been duly incorporated and is validly
existing as a national banking association under the laws of the
United States and has the power and authority to enter into and to
perform all actions required of it under the Pooling and Servicing
Agreement, the Supplement and the Enhancement Agreement;
(ii) each of the Pooling and Servicing Agreement, the
Supplement and the Enhancement Agreement has been duly authorized,
executed and delivered by the Trustee and constitutes a legal,
valid and binding obligation of the Trustee, enforceable against
the Trustee in accordance with its terms, except as such
enforceability may be limited by (A) bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship,
receivership or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights in general, as
such laws would apply in the event of a bankruptcy, insolvency,
liquidation, reorganization, moratorium, conservatorship,
receivership or similar occurrence affecting the Trustee, and (B)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
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<PAGE> 16
(iii) the Certificates have been duly authenticated and
delivered by the Trustee;
(iv) the execution and delivery of the Pooling and Servicing
Agreement, the Supplement and the Enhancement Agreement by the
Trustee and the performance by the Trustee of their respective
terms do not conflict with or result in a violation of (A) any law
or regulation of the United States of America or the state of
Minnesota governing the banking or trust powers of the Trustee, or
(B) the certificate of incorporation or articles of association or
by-laws of the Trustee; and
(v) no approval, authorization or other action by, or filing
with, any governmental authority of the United States of America
or the sate of Minnesota having jurisdiction over the banking or
trust powers of the Trustee is required in connection with the
execution and delivery by the Trustee of the Pooling and Servicing
Agreement, the Supplement and the Enhancement Agreement or the
performance by the Trustee thereunder;
(l) you shall have received an opinion or opinions of counsel to
the Enhancement Provider, dated the Closing Date, and satisfactory in form
and substance to you and your counsel, to the effect that:
(i) the Enhancement Provider is duly organized and validly
existing under the laws of the jurisdiction of its incorporation,
is duly qualified and/or licensed to do business in all
jurisdictions where the nature of its operations as contemplated
in the Enhancement Agreement requires such qualification, and has
the power and authority (corporate and other) to enter into the
Enhancement Agreement and to perform its obligations thereunder;
and
(ii) the Enhancement Agreement has been duly authorized,
executed and delivered by the Enhancement Provider, and
constitutes the legal, valid and binding obligation of the
Enhancement Provider, enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization,
conservatorship, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights as such laws would apply
in the event of the insolvency, liquidation or reorganization or
other similar occurrence with respect to the Enhancement Provider
or in the event of any moratorium or similar occurrence affecting
the Enhancement Provider.
(m) you shall have received reliance letters, if applicable, with
respect to any opinions delivered to the Transferor by foreign counsel of
the Enhancement Provider for the Enhancement Agreement, if any, which
opinions shall include matters relating to (i) the due organization of
the Enhancement Provider, (ii) the
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<PAGE> 17
authorization, execution, delivery and performance by the Enhancement
Provider of the Enhancement Agreement and the binding effect of the
Enhancement Agreement, and (iii) the enforceability in the foreign
jurisdiction in which such Enhancement Provider is located of a judgment
obtained under the Enhancement Agreement in a United States federal court
or in a court of the State of New York; such reliance letters shall
include all matters that are contained in the opinions of foreign
counsel;
The Transferor will furnish to you conformed copies of such opinions,
certificates, letters and documents as you reasonably request.
7. Indemnification.
(a) The Transferor will indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning
of the Act or the Exchange Act and the respective officers, directors and
employees of each such person, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; and will
reimburse each Underwriter and each such officer, director, employee or
controlling person for any legal or other expenses reasonably incurred by
such Underwriter and each such officer, director, employee or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action, subject to the following proviso, as
such expenses are incurred; provided, however, that (i) the Transferor
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement in or omission or alleged omission
made in any such documents in reliance upon and in conformity with
written information furnished to the Transferor by an Underwriter
specifically for use therein and (ii) such indemnity with respect to any
untrue statement or alleged untrue statement or omission or alleged
omission in the Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or any person controlling such Underwriter) from whom
the person asserting any such loss, claim, damage or liability purchased
the Certificates which are the subject thereof, if such person was not
given or sent a copy of the Prospectus excluding documents incorporated
therein by reference, at or prior to the confirmation of the sale of such
Certificates to such person in any case where such delivery is required
by the Act and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in the
Preliminary Prospectus and forming the basis for the related cause of
action was corrected in the Prospectus.
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<PAGE> 18
This indemnity agreement will be in addition to any liability which the
Transferor may otherwise have.
(b) Each Underwriter severally, and not jointly, will indemnify and
hold harmless the Transferor, each of its directors, each of its officers
who have signed the Registration Statement and each person, if any, who
controls the Transferor within the meaning of the Act or the Exchange Act
and the respective officers, directors and employees of each such person
against any losses, claims, damages or liabilities to which the
Transferor or any such director, officer or controlling person may become
subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Transferor by such Underwriter
specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Transferor or any such director,
officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action as such
expenses are incurred. This indemnity agreement will be in addition to
any liability that such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify the indemnifying party of the
commencement thereof; but the omission and/or delay so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than in this Section unless such
omission caused actual prejudice to the party not notified; in case any
such action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and, to the extent that it may
elect by written notice jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with
defense thereof other than reasonable costs of investigation. If the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties that are different from or additional to those
available to the indemnifying
- 17 -
<PAGE> 19
party, the indemnified party or parties shall have the right to select
separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified
party or parties. No indemnifying party may avoid its duty to indemnify
under this Section 7 if such indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of any judgement in, any pending
or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party unless such settlement includes an unconditional
release of such indemnified party from all liability on all claims that
are the subject matter of such action. An indemnifying party shall not
be liable for any settlement of any claim effected without its written
consent.
(d) If recovery is not available under the foregoing indemnification
provisions of this Section for any reason other than as specified
therein, the parties entitled to indemnification by the terms thereof
shall be entitled to contribution to liabilities and expenses, except to
the extent that contribution is not permitted under Section 11(f) of the
Act. In determining the amount of contribution to which the respective
parties are entitled, there shall be considered (i) the relative benefit
received by the Transferor on the one hand and the Underwriters on the
other hand from the offering of the Certificates or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law, the relative benefits referred to in clause (i) above but also the
relative fault of the Transferor on the one hand and the Underwriters on
the other hand in connection with the statement or omission that resulted
in such liabilities and expenses as well as any other relevant equitable
considerations. The relative benefits received by the Transferor on the
one hand and the Underwriters on the other hand shall be deemed to be in
the same proportion as the total net proceeds of the offering of the
Certificates (before deducting expenses) received by the Transferor bear
to the total underwriting discounts and commissions received by the
Underwriters in connection with the offering of the Certificates. The
relative fault of the parties shall be determined by reference to, among
other things, the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any
other equitable considerations appropriate under the circumstances. The
Transferor and the Underwriters agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation (even if the Underwriter were treated as one entity for such
purpose).
8. Default of Underwriters. If any Underwriter or Underwriters
participating in an offering of Certificates default in their obligations to
purchase Certificates hereunder and the aggregate principal amount of such
Certificates which such defaulting Underwriter or Underwriters agreed, but
failed, to purchase does not exceed 10% of the total principal amount of the
Certificates, you may make arrangement satisfactory to the Transferor for the
purchase of such Certificates by other persons, including any of the
Underwriters
- 18 -
<PAGE> 20
participating in such offering, but if no such arrangements are made within a
period of 36 hours after the Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective total
commitments hereunder, to purchase the Certificates which such defaulting
Underwriters agreed but failed to purchase. If any Underwriter or Underwriters
so default and the aggregate principal amount of Certificates with respect to
which such default or defaults occur is more than 10% of the total principal
amount of the Certificates and arrangements satisfactory to you and the
Transferor for the purchase of such Certificates by other persons are not made
within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Transferor,
except as provided in Section 10. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section. Nothing herein will relieve a defaulting Underwriter from liability
for its default.
9. Termination of the Obligations of the Underwriters. The obligations of
the Underwriters to purchase the Certificates on the Closing Date shall be
terminable by the Underwriters by written notice delivered to the Transferor if
at any time on or prior to the Closing Date (i) trading in securities generally
on the New York Stock Exchange shall have been suspended or materially limited,
or there shall have been any setting of minimum prices for trading on such
exchange or any suspension of trading of the securities of Proffitt's on any
exchange or in the over-the-counter market, (ii) a general moratorium on
commercial banking activities in New York or Mississippi shall have been
declared by any of Federal, New York or Mississippi authorities, (iii) there
shall have occurred any material outbreak or escalation of hostilities or other
calamity or crisis, the effect of which on the financial markets of the United
States is such as to make it, in your reasonable judgement, as representative
of the Underwriters, impracticable to market the Certificates on the terms and
in the manner contemplated in the Prospectus, (iv) any change or any
development involving a prospective change, materially and adversely affecting
(A) the Trust Property taken as whole or (B) the business or properties of the
Transferor or Proffitt's occurs, which, in your reasonable judgment as
representative of the Underwriters, in the case of either (A) or (B), makes it
impracticable to market the Certificates on the terms and in the manner
contemplated in the Prospectus.
10. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements by
the Transferor or its officers and of the several Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation, or statement as to the results thereof, made
by or on behalf of the Underwriters, the Transferor or any of their respective
officers or directors or any controlling person, and will survive delivery of
and payment for the Certificates.
If this Agreement is terminated pursuant to Sections 8 or 9 or if for
any reason the purchase of the Certificates by the Underwriters is not
consummated, the Transferor shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 5(f), and the obligations of the
Transferor and the Underwriters pursuant to Section 7 shall remain in effect.
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<PAGE> 21
11. Notices. All communications hereunder will be in writing and, if sent
to an Underwriter, will be mailed, delivered or telecopied to NationsBanc
Capital Markets, Inc., NationsBank Corporate Center, 100 North Tryon Street,
Charlotte, North Carolina 28255-0001, Attention: Luis O. Araneda, facsimile
number 704-388-0622 or if sent to the Transferor, will be mailed, delivered or
telecopied to Proffitt's Credit Corporation, 750 Lakeshore Parkway, Birmingham,
Alabama 35211, Attention: Douglas Coltharp, facsimile number (205) 940-4709,
or such other address specified in the applicable Terms Agreement; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be
mailed, delivered or telecopied to such Underwriter at the address furnished by
it.
12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 7 hereof,
and their successors and assigns, and no other person will have any right or
obligation hereunder.
13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon it will
become a binding agreement among the Transferor and the several Underwriters in
accordance with its terms. Alternatively, the execution of this Agreement by
the Transferor and its acceptance by or on behalf of the Underwriters may be
evidenced by an exchange of telecopied or other written communications.
Very truly yours,
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
-----------------------------
Name:
-------------------------
Title:
------------------------
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
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<PAGE> 22
NATIONSBANC CAPITAL MARKETS, INC.,
as Representative of the several Underwriters
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
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<PAGE> 1
EXHIBIT 4.1
FORM OF
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
SERVICER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
OF THE
PROFFITT'S CREDIT CARD MASTER TRUST
------------------------------
MASTER POOLING AND SERVICING AGREEMENT
DATED AS OF JULY ___, 1997
------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I DEFINITIONS........................................................................ IV
Section 1.1 Definitions................................................................ iv
Section 1.2 Other Definitional Provisions.............................................. 23
ARTICLE II APPOINTMENT OF TRUSTEE; CONVEYANCE OF RECEIVABLES; ISSUANCE OF
CERTIFICATES....................................................................... 24
Section 2.1 Appointment of Trustee; Conveyance of Receivables.......................... 24
Section 2.2 Acceptance by Trustee...................................................... 26
Section 2.3 Representations and Warranties Regarding the Transferor.................... 27
Section 2.4 Representations and Warranties of the Transferor Relating to the
Agreement and any Supplement and the Receivables........................... 29
Section 2.5 Covenants of the Transferor................................................ 35
Section 2.6 Addition of Accounts; Repurchase of Investor Certificates.................. 38
Section 2.7 Removal of Accounts........................................................ 41
Section 2.8 Discount Option Receivables................................................ 43
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES........................................ 44
Section 3.1 Acceptance of Appointment and Other Matters Relating to the Servicer....... 44
Section 3.2 Servicing Compensation..................................................... 46
Section 3.3 Representations, Warranties and Covenants of the Servicer.................. 46
Section 3.4 Reports and Records for the Trustee........................................ 49
Section 3.5 Annual Servicer's Certificate.............................................. 51
Section 3.6 Annual Independent Public Accountants' Servicing Report.................... 51
Section 3.7 Tax Treatment.............................................................. 52
Section 3.8 Adjustments................................................................ 53
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF
COLLECTIONS........................................................................ 53
Section 4.1 Establishment of Collection Account and Allocations with Respect to the
Exchangeable Transferor Certificate........................................ 54
ARTICLE V IS RESERVED AND MAY BE SPECIFIED IN ANY SUPPLEMENT WITH
RESPECT TO ANY SERIES.............................................................. 59
ARTICLE VI THE CERTIFICATES................................................................... 59
Section 6.1 The Certificates........................................................... 59
Section 6.2 Authentication of Certificates............................................. 60
Section 6.3 Registration of Transfer and Exchange of Certificates...................... 60
Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates.......................... 64
Section 6.5 Persons Deemed Owners...................................................... 64
Section 6.6 Appointment of Paying Agent................................................ 65
</TABLE>
i
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<TABLE>
<S> <C> <C>
Section 6.7 Access to List of Certificateholders' Names and Addresses.................. 66
Section 6.8 Authenticating Agent....................................................... 67
Section 6.9 Tender of Exchangeable Transferor Certificate.............................. 68
Section 6.10 Global Certificate; Euro-Certificate Exchange Date......................... 70
Section 6.11 Book-Entry Certificates.................................................... 71
Section 6.12 Notices to Clearing Agency................................................. 72
Section 6.13 Definitive Certificates.................................................... 72
Section 6.14 Meetings of Certificateholders............................................. 73
ARTICLE VII OTHER MATTERS RELATING TO THE TRUST................................................ 75
Section 7.1 Liability of the Transferor................................................ 75
Section 7.2 Merger or Consolidation of, or Assumption of the Obligations
of, the Transferor......................................................... 75
Section 7.3 Limitation on Liability of the Transferor.................................. 77
Section 7.4 Liabilities................................................................ 77
ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER............................................. 78
Section 8.1 Liability of the Servicer.................................................. 78
Section 8.2 Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer........................................................... 78
Section 8.3 Limitation on Liability of the Servicer and Others......................... 79
Section 8.4 Indemnification of the Trust and the Trustee............................... 80
Section 8.5 The Servicer Not to Resign................................................. 81
Section 8.6 Access to Certain Documentation and Information Regarding
the Receivables............................................................ 81
Section 8.7 Delegation of Duties....................................................... 81
Section 8.8 Examination of Records..................................................... 82
ARTICLE IX PAY OUT EVENTS..................................................................... 82
Section 9.1 Pay Out Events............................................................. 82
Section 9.2 Additional Rights Upon the Occurrence of Certain Events.................... 83
ARTICLE X SERVICER DEFAULTS.................................................................. 85
Section 10.1 Servicer Defaults.......................................................... 85
Section 10.2 Trustee to Act; Appointment of Successor................................... 87
Section 10.3 Notification to Certificateholders......................................... 89
Section 10.4 Waiver of Past Defaults.................................................... 90
ARTICLE XI THE TRUSTEE........................................................................ 90
Section 11.1 Duties of Trustee.......................................................... 90
Section 11.2 Certain Matters Affecting the Trustee...................................... 92
Section 11.3 Trustee Not Liable for Recitals in Certificates............................ 94
Section 11.4 Trustee May Own Certificates............................................... 94
Section 11.5 The Servicer to Pay Trustee's Fees and Expenses............................ 94
Section 11.6 Eligibility Requirements for Trustee....................................... 95
Section 11.7 Resignation or Removal of Trustee.......................................... 95
</TABLE>
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<TABLE>
<S> <C> <C>
Section 11.8 Successor Trustee.......................................................... 96
Section 11.9 Merger or Consolidation of Trustee......................................... 96
Section 11.10 Appointment of Co-Trustee or Separate Trustee.............................. 97
Section 11.11 Tax Returns and Compliance................................................. 98
Section 11.12 Trustee May Enforce Claims Without Possession of Certificates.............. 99
Section 11.13 Suits for Enforcement...................................................... 99
Section 11.14 Rights of Certificateholders to Direct Trustee............................. 99
Section 11.15 Representations and Warranties of Trustee.................................. 99
Section 11.16 Maintenance of Office or Agency............................................ 100
ARTICLE XII TERMINATION........................................................................ 100
Section 12.1 Termination of Trust....................................................... 100
Section 12.2 Optional Purchase; Final Termination Date of Investor
Certificates of any Series............................ .................... 101
Section 12.3 Final Payment with Respect to any Series................................... 102
Section 12.4 Transferor's Termination Rights............................................ 103
Section 12.5 Defeasance................................................................. 104
ARTICLE XIII MISCELLANEOUS PROVISIONS........................................................... 105
Section 13.1 Amendment.................................................................. 105
Section 13.2 Protection of Right, Title and Interest to Trust........................... 108
Section 13.3 Limitation on Rights of Certificateholders................................. 110
Section 13.4 Governing Law.............................................................. 110
Section 13.5 Notices.................................................................... 110
Section 13.6 Severability of Provisions................................................. 111
Section 13.7 Assignment................................................................. 112
Section 13.8 Certificates Nonassessable and Fully Paid.................................. 112
Section 13.9 Further Assurances......................................................... 112
Section 13.10 No Waiver; Cumulative Remedies............................................. 112
Section 13.11 Counterparts............................................................... 112
Section 13.12 Third-Party Beneficiaries.................................................. 112
Section 13.13 Actions by Certificateholders.............................................. 112
Section 13.14 Merger and Integration..................................................... 113
Section 13.15 Headings................................................................... 113
Section 13.16 Certificates and Opinions of Counsel....................................... 113
Section 13.17 Non-competition Covenant................................................... 114
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A: Form of Exchangeable Transferor Certificate
Exhibit B: Form of Assignment of Receivables in Additional Accounts
Exhibit C: Form of Reassignment of Receivables
Exhibit D: Form of Series Closing Date Report
Exhibit E: Form of Monthly Servicer's Certificate
Exhibit F: Form of Annual Servicer's Certificate
</TABLE>
iii
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<TABLE>
<S> <C>
Exhibit G: Form of Opinion of Counsel with Respect to the Pooling and Servicing Agreement and
Additional Accounts
Exhibit H: Form of Annual Opinion of Counsel
Exhibit I: Account Agreements
Exhibit J: Form of Depository Agreement (Letter of Representations)
</TABLE>
SCHEDULES
Schedule 1 List of Accounts
THIS MASTER POOLING AND SERVICING AGREEMENT, dated as of July ___, 1997,
is by and among PROFFITT'S CREDIT CORPORATION, a Nevada corporation, as
Transferor, PROFFITT'S, INC., a Tennessee corporation, as Servicer, and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
Trustee.
In consideration of the mutual agreements herein contained, each party
agrees as follows for the benefit of the other party and, to the extent
provided herein or in any Supplement, for the benefit of the Certificateholders
and any Enhancement Provider:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Account" shall mean each consumer revolving credit card account,
originated or acquired by the Sellers, the Transferor or their Affiliates,
including the Bank, which account (i) is identified on the Servicer's master
computer files by the identifying codes specified in the computer file,
microfiche or written list delivered to the Trustee by the Transferor pursuant
to Section 2.1 or Section 2.6, (ii) has been established or exists pursuant to
an Account Agreement between an Eligible Originator and any Person not a
Governmental Authority and (iii) is or will be identified by account number and
Receivable balance as of the Cut-Off Date and as of each Additional Account
Cut-Off Date in each computer file, microfiche or written list delivered to the
Trustee by the Transferor pursuant to Section 2.1 or Section 2.6. The term
"Account" shall include each Transferred Account, and shall be deemed to refer
to an Additional Account only from and after the Additional Account Closing
Date with respect thereto and to an Automatic Additional Account included
automatically pursuant to Section 2.6(d) only from and after the Creation Date
with respect thereto. An "Account" shall be deemed to refer to any Removed
Account only prior to its Removal Date.
4
<PAGE> 6
"Account Agreements" shall mean the agreements and related federal
Truth-in-Lending Act disclosure statements substantially in the forms attached
as Exhibit I, as such agreements and/or statements and Exhibit I may be
amended, modified or changed from time to time, subject only to Section 2.5(c)
hereof.
"Accumulation Period" shall have, with respect to any Series, the meaning,
if any, specified in the applicable Supplement.
"Additional Account Closing Date" shall mean each date on which Additional
Accounts will be included as Accounts pursuant to Section 2.6.
"Additional Account Cut-Off Date" shall mean with respect to any
Additional Account, the last day of the Monthly Period preceding the Additional
Account Closing Date.
"Additional Accounts" shall have the meaning specified in Section 2.6(a).
"Adjusted Investor Amount" shall have the meaning specified in the
Supplements for all outstanding Series.
"Adjustment Payment Obligation" shall have the meaning specified in
Section 3.8(a).
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Aggregate Automatic Addition Limit" shall mean (i) the number of Eligible
Accounts designated as Automatic Additional Accounts, pursuant to Section
2.6(d), which would either (x) with respect to any period of three (3)
consecutive Monthly Periods commencing in January, April, July or October of a
calendar year equals 15% of the sum of the number of Accounts as of the last
Business Day preceding the commencement of such period (or, the Cut-Off Date,
whichever is later) and the number of Additional Accounts included as Accounts
pursuant to Section 2.6(a) or Section 2.6(b) since such first day or (y) with
respect to any period of twelve (12) consecutive Monthly Periods, equals 20% of
the sum of the number of Accounts as of the last Business Day preceding the
commencement of such period (or, the Cut-Off Date, whichever is later) and the
number of Additional Accounts included as Accounts pursuant to Section 2.6(a)
or Section 2.6(b) since such Business Day or (ii) such higher number of
Automatic Additional Accounts as to which Standard & Poor's and Moody's and any
other applicable Rating Agency rating any Certificates shall consent in
writing.
"Aggregate Investor Amount" shall mean with respect to any date of
determination, the sum of the Investor Amounts with respect to all Series of
Investor Certificates then outstanding.
5
<PAGE> 7
"Aggregate Investor Percentage" shall mean with respect to any date of
determination, the sum of the applicable Investor Percentages with respect to
all Series then outstanding.
"Aggregate Principal Receivables" shall mean, for any date of
determination, the aggregate amount of Principal Receivables at the end of such
day.
"Agreement" shall mean this Master Pooling and Servicing Agreement and all
amendments hereof and supplements hereto, including any Supplement.
"Amortization Period" shall mean, with respect to any Series, the period
following the Revolving Period which shall be the Accumulation Period,
Controlled Amortization Period, Principal Amortization Period, Rapid
Amortization Period or other type of amortization period (as specified in any
related Supplement).
"Applicants" shall have the meaning specified in Section 6.7.
"Appointment Day" shall have the meaning specified in Section 9.2(a).
"Assignment" shall have the meaning specified in Section 2.6(c).
"Authorized Newspaper" shall mean one or more newspapers of general
circulation in the Borough of Manhattan, The City of New York printed in the
English language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays and holidays, and shall include The Wall Street
Journal.
"Automatic Additional Accounts" shall have the meaning specified in
Section 2.6(d).
"Bank" shall mean any national banking association or banking corporation
organized under the laws of the United States or any state thereof that is an
Affiliate of the Company that may, as part of its activities originate,
transfer and/or service Accounts and Receivables.
"Bearer Certificates" shall have the meaning specified in Section 6.1.
"Bearer Rules" shall mean the provisions of the Code, in effect from time
to time, governing the treatment of bearer obligations, including sections
163(f), 871, 881, 1441, 1442 and 4701, and any regulations thereunder
including, to the extent applicable to any Series, proposed or temporary
regulations.
"Book-Entry Certificates" shall mean beneficial interests in the Investor
Certificates, the ownership and transfers of which shall be evidenced or made
through book entries by a Clearing Agency as described in Section 6.11;
provided, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer
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<PAGE> 8
permitted and Definitive Certificates are issued to the Certificate Owners,
such Definitive Certificates shall replace Book-Entry Certificates.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in Birmingham, Alabama; Jackson, Mississippi;
Dallas, Texas; Atlanta, Georgia; Minneapolis, Minnesota or New York, New York
(or, with respect to any Series, any additional city specified in the related
Supplement) are authorized or obligated by law or executive order to be closed.
"Cede" shall mean Cede & Co. as nominee of The Depository Trust Company.
"Cedel" shall mean Cedel Bank, societe anonyme or any successor thereto.
"Certificate" shall mean a certificate of any Series of the Investor
Certificates or the Exchangeable Transferor Certificate.
"Certificateholder" or "Holder" shall mean the Person in whose name a
Certificate is registered in the Certificate Register.
"Certificate Interest" shall mean interest payable with respect to the
applicable Series of Investor Certificates pursuant to the applicable
Supplement.
"Certificate Owner" shall mean, with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency or on the books of a Person
maintaining an account with such Clearing Agency (directly a participant or as
an indirect participant, in accordance with the rules of such Clearing Agency),
and otherwise shall be (i) the registered owner of Registered Certificates as
shown on the Certificate Register of the Transfer Agent and Registrar with
respect to such Certificates or (ii) the Holder of any Bearer Certificates.
"Certificate Principal" shall mean principal payable with respect to the
applicable Series of Investor Certificates pursuant to the applicable
Supplement.
"Certificate Rate" shall mean, with respect to any Series of Certificates,
the percentage (or formula on the basis of which such rate shall be determined)
stated in the applicable Supplement; provided that, unless otherwise provided
in the applicable Supplement, in each case such rate shall be calculated and
paid on the basis of a 360-day year consisting of twelve 30-day months.
"Certificate Register" shall mean the register maintained pursuant to
Section (6.3) providing for the registration of the applicable Certificates and
transfers and exchanges thereof.
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<PAGE> 9
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended, or any successor provision thereto, including The Depository Trust
Company and Cede.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the date of
issuance of such Series of Certificates, as specified in the related
Supplement.
"Code" or "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"Collection Account" shall have the meaning specified in Section 4.1.
"Collections" shall mean all payments (including Recoveries) received by
the Servicer with respect to the Receivables, in the form of cash, checks, wire
transfers, ATM transfers or other form of payment in accordance with the
related Account Agreements in effect from time to time. Collections with
respect to any Monthly Period shall include (i) interest and other investment
earnings (net of losses and investment expenses) on funds held in the Excess
Funding Account and (ii) the amount of Interchange (if any) allocable to any
Series pursuant to any Supplement with respect to such Monthly Period (to the
extent received by the Trust).
"Common Depositary" shall mean the Person appointed as such as specified
in the related Supplement, in its capacity as common depositary for the
respective accounts of a Foreign Clearing Agency.
"Company" shall mean Proffitt's, Inc. and its successors and assigns.
"Controlled Amortization Period" shall have, with respect to any Series,
the meaning, if any, specified in the applicable Supplement.
"Corporate Trust Office" shall mean the principal office of the Trustee at
which at any particular time its corporate business shall be administered,
which office at the date of the execution of this Agreement is located at Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070 Attn: Corporate
Trust Services -- Asset-Backed Administration.
"Coupons" shall have the meaning specified in Section 6.1.
"Creation Date" shall mean the date that an Account is originated and is
identified on the Servicer's master computer files.
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<PAGE> 10
"Credit Card Guidelines" shall mean the policies and procedures relating
to the operation of the consumer revolving credit card business of each
Eligible Originator, including the policies and procedures for determining the
creditworthiness of customers, the extension of credit, including special and
other promotions, to customers and relating to the maintenance of consumer
revolving credit card accounts and the collection of receivables, as such
policies and procedures may be amended from time to time in accordance with
Section 2.5(c).
"Cut-Off Date" shall mean the close of business on [ ],
1997.
"Date of Processing" shall mean, with respect to any transaction, the
Business Day on which such transaction is first recorded in the Servicer's
computer master file of consumer revolving credit card accounts (without regard
to the effective date of such recordation).
"Debtor Relief Laws" shall mean the United States Bankruptcy Code, as
amended, and other insolvency, conservatorship, receivership, reorganization,
marshaling of assets or liabilities, liquidation, readjustment of debts,
moratorium, or other similar laws affecting the enforcement, of creditors'
rights in general.
"Default Amount" shall mean, for any Monthly Period, the aggregate amount
of Principal Receivables (other than Ineligible Receivables) in all Accounts
which became Defaulted Accounts during such Monthly Period (determined in each
case as of the date on which the related Account became a Defaulted Account)
minus Recoveries, if any, received during such Monthly Period, provided the
Default Amount shall not be less than $0.
"Defaulted Account" shall mean each Account with respect to which, in
accordance with the Credit Card Guidelines pursuant to which such Account is
governed or the customary and usual servicing procedures of the Servicer for
servicing consumer revolving credit card receivables comparable to the
Receivables, the Servicer has charged off the Receivables in such Account as
uncollectible; in any event, an Account shall be deemed a Defaulted Account no
later than the earlier of (i) the last day of the seventh calendar month in
which the related Obligor has failed to make a qualifying minimum payment on a
delinquent Account and (ii) 30 days after receipt of notice by the Servicer
that the related Obligor has died or has filed a bankruptcy petition or has had
a bankruptcy petition filed against him. Notwithstanding any other provision
hereof, any Receivables in a Defaulted Account which are Ineligible Receivables
shall be treated as Ineligible Receivables rather than as Receivables in
Defaulted Accounts.
"Defeasance" shall have the meaning specified in Section 12.5.
"Defeased Series" shall have the meaning specified in Section 12.5.
"Definitive Certificates" shall have the meaning specified in Section
6.11.
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<PAGE> 11
"Definitive Euro-Certificates" shall have the meaning specified in Section
6.10.
"Depository Agreement" shall mean the agreement among the Transferor, the
Trustee and the initial Clearing Agency, in the form attached hereto as Exhibit
J, or as otherwise provided in the related Supplement.
"Determination Date" shall mean, unless otherwise specified in a
Supplement for any Series, with respect to a Monthly Period, a Business Day
occurring in the first 10 days of the succeeding calendar month as selected
from time to time by Servicer prior to each Distribution Date.
"Discount Option" shall have the meaning specified in Section 2.8(c).
"Discount Option Receivables" shall, consistent with Section 2.8, be equal
to, on any Date of Processing (commencing with the Cut Off Date), the sum of
(a) the aggregate Discount Option Receivables at the end of the prior Date of
Processing plus (b) any new Discount Option Receivables created on such Date of
Processing minus (c) any Discount Option Receivable Collections received on
such Date of Processing. The "Discount Option Receivables" created on any Date
of Processing shall mean the product of (i) the amount of Principal Receivables
created on such Date of Processing (without giving effect to the deduction of
the Discount Option Receivables) and (ii) the Discount Percentage; provided,
however, that the aggregate "Discount Option Receivables" at the end of the
Date of Processing preceding the Cut Off Date shall be deemed to be $_______.
"Discount Option Receivable Collections" shall mean, on any Date of
Processing on and after the date on which the Transferor's exercise of its
discount option pursuant to Section 2.8 is in effect, the product of (a) a
fraction the numerator of which is the amount of Discount Option Receivables
and the denominator of which is the sum of the Principal Receivables and the
Discount Option Receivables, in each case at the end of the prior Monthly
Period, and (b) Collections of Principal Receivables (without giving effect to
Discount Option Receivables) on such Date of Processing.
"Discount Percentage" shall mean the percentage designated by the
Transferor pursuant to Section 2.8 or in any Supplement.
"Dissolution Event" shall have the meaning specified in Section 9.2(a).
"Distribution Date" shall mean ________, 1997 and the fifteenth day of
each calendar month thereafter, or, if such fifteenth day is not a Business
Day, the next succeeding Business Day, unless otherwise specified in the
applicable Supplement.
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<PAGE> 12
"Eligible Account" shall mean, as of the Cut-Off Date (or, with respect to
Additional Accounts, as of the relevant Additional Account Cut-Off Date or,
with respect to an Account included automatically pursuant to Section 2.6(d),
as of the Creation Date with respect thereto) each Account (i) in existence and
owned by any Eligible Originator or the Transferor, (ii) payable in United
States dollars, (iii) the credit card or cards related to which have not been
reported lost or stolen or designated counterfeit or fraudulent, (iv) not
identified by the Transferor in its computer files as having been canceled or
charged off due to the Obligor's bankruptcy or insolvency or death, (v) the
receivables in which have not been charged off as uncollectible prior to the
Cut-Off Date or Additional Account Cut-Off Date or Creation Date, as
applicable, in accordance with the Credit Card Guidelines, (vi) the receivables
in which have not been assigned, pledged or sold (other than pursuant to this
Agreement), (vii) the Obligor of which has provided, as its most recent billing
address, an address in the United States or its territories or possessions and
(viii) with respect to which the Transferor or any corporate Affiliate of the
Transferor is not the Obligor.
"Eligible Originator" shall mean (i) each of the Sellers and their
respective successors and assigns, (ii) any of their Affiliates, including the
Bank or (iii) any other originator or acquirer of Receivables that is a party
to a Receivables Purchase Agreement, provided that, except with respect to the
Sellers as of the Closing Date, the Transferor shall have met the Rating Agency
Condition and shall have delivered such notice(s) of compliance with such
Rating Agency Condition to the Trustee and the Servicer.
"Eligible Receivable" shall mean each Receivable which has arisen under an
Eligible Account:
(i) which was created in compliance with all applicable requirements
of law, and pursuant to an agreement which complies with all applicable
requirements of law, in either case the failure to comply with which
would have a material adverse effect upon Certificateholders,
(ii) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations with, any governmental
authority required to be obtained or given by an Eligible Originator or
by the Transferor in connection with the creation of such Receivable or
the execution, delivery and performance by the Eligible Originator of the
related agreement have been duly obtained or given and are in full force
and effect as of such date of creation;
(iii) as to which at the time of the transfer of such Receivable to
the Trust, the Transferor will have good and marketable title, free and
clear of all Liens (except those Liens permitted by Section 2.5(b));
(iv) which has been the subject of either a valid transfer and
assignment from the Transferor to the Trust of all of the Transferor's
right,
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<PAGE> 13
title and interest therein or the grant of a first priority perfected
security interest therein (and in the proceeds thereof to the extent set
forth in Section 9-306 of the UCC as in effect in the Relevant UCC State),
effective until the termination of the Trust;
(v) which will at all times be the legal, valid and binding payment
obligation of the Obligor thereof enforceable against such Obligor in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity);
(vi) which constitutes either "chattel paper", an "account" or a
"general intangible" under and as defined in Article 9 of the UCC as then
in effect in the Relevant UCC State;
(vii) which, at the time of its transfer to the Trust, has not been
waived or modified except in accordance with the Credit Card Guidelines
or as permitted hereunder;
(viii) which is not at the time of transfer to the Trust, subject,
to the knowledge of the Transferor or the Servicer, any claim of
rescission, setoff, counterclaim or any other defense (including the
defense of usury) of the Obligor, which requires that such Receivable be
charged off in accordance with the Credit Card Guidelines, other than
defenses arising out of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and equity related defenses;
(ix) as to which, at the time of transfer to the Trust, the
Transferor and the Eligible Originator of such Receivable has satisfied
all obligations required to be satisfied by such time; and
(x) as to which the Eligible Originator and/or the Transferor has
done nothing, at the time of its transfer to the Trust, to impair the
rights of the Trust or Certificateholders therein.
"Eligible Servicer" shall mean the Company, McRae's, Inc. or any
other Affiliate of the Company; the Trustee; or otherwise any entity which, at
the time of its appointment as Servicer, (i) is an established financial
institution having capital or net worth of not less than $50,000,000, (ii) is
servicing a portfolio of consumer revolving credit card accounts, (iii) is
legally qualified and has the capacity to service the Accounts, (iv) has
demonstrated the ability to professionally service a portfolio of similar
consumer
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<PAGE> 14
revolving credit card accounts in accordance with standards of skill and care
customary in the industry and (v) is qualified to use the software that is then
currently being used to service the Accounts or obtains the right to use or has
its own software which is adequate to perform its duties under this Agreement.
"Enhancement" shall mean, with respect to any Series or class of
Certificates within a Series, any letter of credit, guaranteed rate agreement,
maturity guaranty facility, liquidity facility, cash collateral account, cash
collateral guaranty, surety bond, insurance policy, tax protection agreement,
interest rate swap, interest rate cap, spread account, reserve account or other
contract, agreement or arrangement (including the subordination of a Series or
class to another Series or class) for the benefit of Certificateholders of such
Series or class, as set forth in the applicable Supplement.
"Enhancement Investor Amount" shall have, with respect to any Series, the
meaning specified in the applicable Supplement.
"Enhancement Provider" shall mean, with respect to any Series, that Person
designated as such in the applicable Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
"Euro-Certificate Exchange Date" shall mean, with respect to any Series,
the date specified in the applicable Supplement.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System, or any successor thereto.
"Euroclear System" shall mean the Euroclear Clearance System, Societe
Cooperative, a Belgian cooperative corporation, all operations of which are
conducted by the Euroclear Operator.
"Excess Funding Account" shall have the meaning specified in Section
4.1(g).
"Excess Funding Amount" shall mean the amount held in the Excess Funding
Account.
"Exchange" shall mean the procedure described under Section 6.9.
"Exchange Date" shall have, with respect to any Series issued pursuant to
an Exchange, the meaning specified in Section 6.9.
"Exchangeable Transferor Certificate" shall mean the certificate executed
by the Transferor and authenticated by the Trustee, substantially in the form
of Exhibit A
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<PAGE> 15
and exchangeable as provided in Section 6.9 for one or more Series of Investor
Certificates and any reissued Exchangeable Transferor Certificate.
"Exchange Notice" shall have, with respect to any Series issued pursuant
to an Exchange, the meaning specified in Section 6.9.
"FASIT" shall mean a financial asset securitization trust as defined in
the Code.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"Final Termination Date" shall have the meaning specified in Section
12.1(a).
"Finance Charge Receivables" shall mean (i) Receivables created in respect
of Finance Charges and (ii) Discount Option Receivables. Collections of Finance
Charge Receivables with respect to any Monthly Period also shall include the
sum of (a) the amount of Interchange (if any) allocable to any Series pursuant
to any Supplement with respect to such Monthly Period (to the extent received
by the Trust), (b) the excess, if any, of Recoveries collected during such
Monthly Period over the aggregate amount of Receivables in Defaulted Accounts
charged off during such Monthly Period and (c) interest, if any, earned (net of
investment expenses and losses) on the Excess Funding Account.
"Finance Charge Shortfalls" shall have, with respect to any Series, the
meaning specified in the applicable Supplement.
"Finance Charges" shall have the meaning specified in the Account
Agreement applicable to each Account, and in all events, notwithstanding the
terms of the Account Agreement, shall include interest, cash advance fees,
annual cardholder fees, late fees, over limit fees, returned check fees and all
other fees and charges on the Account (other than Insurance Charges and service
contract charges).
"Fiscal Year" shall mean the period beginning on the Sunday following the
Saturday that is closest to the 31st of January of each year, and ending on the
Saturday that is closest to the 31st of January of the following year.
"Foreign Clearing Agency" shall mean, with respect to any Series, Cedel or
the Euroclear Operator or any other established clearing agency for securities
outside the United States designated in the applicable Supplement.
"Global Certificate" shall have the meaning specified in Section 6.10(a).
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<PAGE> 16
"Governmental Authority" shall mean the United States of America, any
state or other political subdivision thereof and any United States entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Group" shall mean, with respect to any Series, the group of Series, if
any, in which the related Supplement specifies such Series is to be included.
"Ineligible Receivable" shall have the meaning specified in Section
2.4(d)(iii).
"Initial Closing Date" shall mean [ ] 1997.
"Initial Investor Amount" shall mean, with respect to any Series, the
amount specified in the applicable Supplement.
"Insurance Charges" shall mean, with respect to any Account, the monthly
premiums charged to the related Obligor with respect to any Insurance Policies.
"Insurance Policies" shall mean any credit life or health, accident or
supplemental or other insurance plans offered by or through the Transferor or
any Seller with respect to the Accounts.
"Insurance Proceeds" shall mean amounts received or recovered pursuant to
any Insurance Policies.
"Interchange" shall mean interchange fees payable (whether directly or as
a result of any assignment or transfer) to the Bank, any Seller or the
Transferor, through VISA USA, Inc. and MasterCard International Incorporated,
or any other credit card organization.
"Investor Amount" shall have, with respect to each Series, the meaning
specified in the applicable Supplement.
"Investor Certificate" shall mean any one of the certificates executed by
the Transferor and authenticated by the Trustee substantially in the form
attached to the applicable Supplement.
"Investor Certificateholder" shall mean the holder of record of an
Investor Certificate.
"Investor Charge Offs" shall have, with respect to each Series, the
meaning specified in the applicable Supplement.
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<PAGE> 17
"Investor Default Amount" shall mean, with respect to each Series for any
Monthly Period, an amount equal to the product of (a) the Default Amount for
such Monthly Period and (b) the related Investor Percentage for such Monthly
Period.
"Investor Monthly Servicing Fee" shall have, with respect to each Series,
the meaning specified in Section 3.2.
"Investor Percentage" shall have, with respect to each Series, the meaning
specified in the applicable Supplement.
"Knowledge" or "knowledge" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean those
facts that are known or should reasonably have been known after due inquiry,
except as to the Trustee who shall have no duty of inquiry except as provided
in this Agreement, by the chairman, president, chief financial officer, chief
accounting officer, chief operating officer, chief credit officer, general
counsel, any assistant or deputy general counsel, or any senior or executive
vice president of such Person or the vice president of credit administration or
the treasurer, and, except in the case of the Trustee unless otherwise provided
by this Agreement, the knowledge of any such persons obtained or which would
have been obtained from a reasonable investigation.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the Uniform
Commercial Code (other than any such financing statement filed for
informational purposes only) or comparable law of any jurisdiction to evidence
any of the foregoing.
"Manager" shall mean the managing underwriter of Certificates of any
Series that are offered to the public.
"Minimum Aggregate Principal Receivables" shall mean the sum of the
numerators used to determine Investor Percentages with respect to Principal
Receivables for each Series outstanding for such period.
"Minimum Transferor Amount" shall mean the product of the aggregate
Adjusted Investor Amount for all Series outstanding and the Minimum Transferor
Interest Percentage.
"Minimum Transferor Interest Percentage" shall mean the highest percentage
determined in accordance with the definitions of "Minimum Transferor Interest
Percentage" specified in the Supplements for all outstanding Series.
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<PAGE> 18
"Monthly Period" shall mean, unless otherwise provided in a Supplement,
the period from and including the first day of a calendar month to and
including the last day of such calendar month.
"Monthly Servicing Fee" shall have the meaning specified in Section 3.2.
"Moody's" shall mean Moody's Investors Service, Inc.
"Net Worth" shall mean, with respect to the Transferor and at any time, an
amount equal to the aggregate outstanding principal amount of all Eligible
Receivables at such time, minus the aggregate outstanding amount of all
Investor Certificates at such time, minus the outstanding principal amount at
such time of the subordinated note, if any, issued by the Transferor in
connection with the Receivables Purchase Agreement entered into with any
Eligible Originator, minus any other liabilities of the Transferor, plus, if
all of the subordinated notes of the Transferor have zero balances outstanding,
all cash of the Transferor.
"1933 Act" shall mean the United States Securities Act of 1933, as
amended.
"1940 Act" shall mean the United States Investment Company Act of 1940, as
amended.
"Obligations" shall have the meaning specified in Section 2.1.
"Obligor" shall mean, with respect to any Account, the Person or Persons
obligated to make payments with respect to such Account, including any
guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by any Executive
or Senior Vice President or the Vice President of Credit Administration or the
Treasurer or more senior officer of either of the Transferor or the Servicer
and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of independent outside
counsel, who may be counsel for the Transferor or its Affiliates, and which
shall be reasonably acceptable to the Trustee.
"Paired Series" shall mean (i) each Series that has been paired with
another Series (which Series may be prefunded or partially prefunded), such
that the reduction of the Investor Amount of such Series results in the
increase of the Investor Amount of such other Series.
"Pay Out Event" shall have, with respect to each Series, the meaning
specified in Section 9.1.
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"Paying Agent" shall mean any paying agent appointed pursuant to Section
6.6 and shall initially be the Trustee.
"PCC" shall mean Proffitt's Credit Corporation and its successors and
assigns.
"Permitted Investments" include (i) direct obligations of, and obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, incorporated under the laws of the United States of America or any
state thereof (including the District of Columbia, and any domestic branch or
agency of any foreign bank), and which are subject to supervision and
examination by federal or state banking or depository institution authorities;
provided, however, that the commercial paper, if any, and short-term unsecured
debt obligations of such depository institution or trust company shall have, at
the time of the Trust's investment or contractual commitment to invest therein,
a credit rating from the Rating Agency in the highest investment category
granted by such Rating Agency, (iii) commercial paper having, at the time of
the Trustee's investment or contracted commitment to invest therein, a rating
in the highest investment category granted by such Rating Agency, (iv) bankers'
acceptances issued by any depository institution or trust company described in
clause (ii) above, (v) money market funds which have the highest rating from,
or have otherwise been approved in writing by the Rating Agencies, (vi) time
deposits (having maturities of not more than 30 days) or notes which are
payable on demand by an entity the commercial paper of which has a rating of
the highest investment category granted by the Rating Agencies, (vii) certain
repurchase obligations involving Permitted Investment instruments so long as
the counterparty thereto has, at the time of such investment, a short term debt
rating of at least A-1 or P-1, or the equivalent from the applicable Rating
Agencies, and (viii) any other investments approved in writing by the
applicable Rating Agencies prior to the Trust's investment therein.
"Person" shall mean any legal person, including any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company, Governmental
Authority or other entity of similar nature.
"Principal Account" shall have the meaning specified in each Supplement.
"Principal Amortization Period" shall have, with respect to any Series,
the meaning, if any, specified in the applicable Supplement.
"Principal Receivables" shall mean Receivables other than Finance Charge
Receivables and Receivables in Defaulted Accounts.
"Principal Sharing Series" shall mean a Series that, pursuant to the
Supplement therefor, is entitled to receive Shared Principal Collections.
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<PAGE> 20
"Principal Shortfalls" shall have, generally, the meaning specified in
Section 4.1(h), and specifically, with respect to any Series, the meaning
specified in the applicable Supplement.
"Publication Date" shall have the meaning specified in Section 9.2(a).
"Principal Terms" shall have, with respect to any Series issued pursuant
to an Exchange, the meaning specified in Section 6.9.
"Qualified Institution" shall mean (i) a depositary institution or trust
company, which may include the Trustee, organized under the laws of the United
States or any one of the States thereof including the District of Columbia (or
any domestic branch or agency of any foreign bank), the deposits in which are
insured by the FDIC and which at all times has a short-term unsecured debt or
certificate of deposit rating of at least A-1 or P-1 or a long-term unsecured
debt rating of at least AAA or Aaa or the equivalent, as applicable, by each
Rating Agency or (ii) a depository institution, which shall include the
Trustee, otherwise acceptable to each Rating Agency rating any Series;
provided, however, that an institution which shall have corporate trust powers
and which maintains the Collection Account, the Excess Funding Account, the
Principal Account or any other account maintained for the benefit of
Certificateholders as a fully segregated trust account with the trust
department of such institution shall not be required to meet the foregoing
rating requirements.
"Rapid Amortization Period" shall have, with respect to any Series, the
meaning, if any, specified in the applicable Supplement.
"Rating Agency" shall mean, with respect to any Series, each nationally
recognized statistical rating agency or agencies, if any, selected by the
Transferor to rate the Investor Certificates of such Series.
"Rating Agency Condition" shall mean, with respect to any action, that
each Rating Agency shall have notified the Transferor and the Trustee in
writing that such action will not result in a reduction or withdrawal of its
rating of any outstanding Series with respect to which it is a Rating Agency.
"Reassignment" shall have the meaning specified in Section 2.7(b).
"Receivable" shall mean any amount owing by an Obligor under an Account,
including any Additional Account, from time to time, including, without
limitation, amounts owing for the payment of merchandise and services,
Insurance Charges, service contract charges, Finance Charges and all other fees
and charges. In calculating the aggregate amount of Receivables on any day, the
amount of Receivables shall be reduced by the aggregate amount of credit
balances, and other adjustments stated in Section 3.8 hereof, in the Accounts
on such day. Any Receivables which the Transferor
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is unable to transfer as provided in Section 2.5(d) shall not be included in
calculating the aggregate amount of Receivables.
"Receivables Purchase Agreements" shall mean (i) the receivables purchase
agreements dated as of _____, 1997 between the Transferor, as purchaser, and
each of G. R. Herberger's, Inc., McRae's, Inc., Parisian, Inc. and Proffitt's,
Inc., in each case as Seller, as each such agreement may be amended from time
to time, and (ii) any other receivables purchase agreement between a Seller of
Receivables and the Transferor, substantially in the form of the receivables
purchase agreements referred to in clause (i) above.
"Record Date" shall mean, unless otherwise specified with respect to a
Series in the applicable Supplement, with respect to any Distribution Date, the
close of business on the last Business Day of the immediately preceding
calendar month.
"Recoveries" shall mean all amounts (including Insurance Proceeds, if any)
received by the Servicer with respect to Receivables in Defaulted Accounts.
"Registered Certificates" shall have the meaning specified in Section 6.1.
"Relevant UCC State" shall mean all jurisdictions where UCC filings are
required to perfect and maintain the security interest of the Trustee.
"Removal Date" shall have the meaning specified in Section 2.7(a).
"Removal Notice Date" shall have the meaning specified in Section 2.7(a).
"Removed Accounts" shall have the meaning specified in Section 2.7(a).
"Repurchase Terms" shall mean, with respect to any Series issued pursuant
to an Exchange, the terms and conditions under which the Transferor may
repurchase such Series of Certificates pursuant to Section 12.2 and the related
Supplement.
"Requirements of Law" shall mean, with respect to any Person, the
certificate or articles of incorporation or articles of association and the
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation, or determination of an arbitrator or
Governmental Authority, in each case applicable to or binding upon such Person
or to which such Person is subject, whether federal, state or local (including,
but not limited to, usury laws, the federal Truth in Lending Act, and
Regulations B and Z of the Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean, with respect to the Trustee, for
purposes of this Agreement, any Vice President, Assistant Vice President,
Assistant Secretary or Assistant Treasurer of the Corporate Trust Department in
Minneapolis, Minnesota or any trust officer, or any officer of the Trustee
customarily performing functions similar to
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those performed by the person who at the time shall be such officers, or to
whom any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject, who shall, in any case, be working in
the Asset Backed Securities Group, or any successor thereto responsible for the
administration of this Agreement.
"Revolving Period" shall mean, with respect to each Series, the period
from and including the date of initial issuance of the Investor Certificates of
such Series to, but not including, the day on which an Amortization Period for
such Series commences.
"Sellers" initially shall mean G.R. Herberger's, Inc., McRae's, Inc.,
Parisian, Inc. and Proffitt's, Inc. and their successors and assigns, and,
subject only to the Rating Agency Condition, such other Affiliates of the
Company as the Transferor may designate from time to time, and which may
include the Bank.
"Series" shall mean any Series of Investor Certificates, each as
designated in the applicable Supplement (including any Enhancement Investor
Amount related thereto).
"Servicer" shall mean initially Proffitt's, Inc. and any Person thereafter
appointed as Successor Servicer as herein provided to service the Receivables.
"Servicer Default" shall have the meaning specified in Section 10.1.
"Service Transfer" shall have the meaning specified in Section 10.1.
"Servicing Fee Percentage" shall have, with respect to any Series, the
meaning specified in the applicable Supplement.
"Servicing Officer" shall mean any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Receivables whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
"Shared Excess Finance Charge Collections" shall have, generally, the
meaning provided in Section 4.1(i), and specifically, with respect to any
Series, the meaning specified in the applicable Supplement.
"Shared Principal Collections" shall have generally the meaning specified
in Section 4.1(h) and specifically, with respect to any Series, the meaning
specified in the applicable Supplement.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc.
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"Stated Series Termination Date" shall have, with respect to any Series,
the meaning specified in the applicable Supplement.
"Subservicer" shall mean initially McRae's, Inc. and any Person thereafter
appointed by the Servicer as subservicer of the Receivables.
"Successor Servicer" shall have the meaning specified in Section 10.2.
"Supplement" shall mean, with respect to any Series, a supplement to this
Agreement complying with the terms of Section 6.9, executed in conjunction with
any issuance of any Series.
"Tax Opinion" shall have the meaning specified in Section 6.9(b).
"Termination Notice" shall have, with respect to any Series, the meaning
specified in Section 10.1.
"Transfer Agent and Registrar" shall have the meaning specified in Section
6.3 and initially shall be the Trustee.
"Transferred Account" shall mean a consumer revolving credit card account
with respect to which a new credit card account number has been issued by the
Servicer or the Transferor in accordance with the Credit Card Guidelines, and
which can be traced or identified by reference to or by way of the computer
files, or written microfiche lists delivered to the Trustee pursuant to
Sections 2.1 and 2.6 as an Account which has been transferred (including such
transfers occurring between the Cut-Off Date and the Initial Closing Date).
"Transferor" shall mean PCC or any successor or assign that is an
Affiliate of the Company, including the Bank, as transferor of the Receivables
to the Trust, provided that each successor or assign, on the effective date it
becomes Transferor, has the Minimum Net Worth specified in Section 2.5(f)
hereof, and except in the case of the Bank, meets the separate business
requirements of Section 2.5(g) hereof.
"Transferor Amount" shall mean, on any date of determination, the
Aggregate Principal Receivables at the end of the day immediately prior to such
date of determination, plus the Excess Funding Amount at the end of such day,
minus the Aggregate Investor Amount at the end of such day, minus any
Enhancement Investor Amount at the end of such day (to the extent not included
in the Aggregate Investor Amount).
"Transferor Interest" shall have the meaning specified in Section 4.1(b).
"Transferor Interest Percentage" shall mean, on any date of determination,
the Transferor Amount divided by the Aggregate Principal Receivables.
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"Transferor Percentage" shall mean, on any date of determination, when
used with respect to Collections of Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted Accounts, one hundred percent (100%)
minus the Aggregate Investor Percentage as calculated on such date with respect
to such categories of Receivables by the Servicer.
"Trust" shall mean the trust created by this Agreement, the corpus of
which shall consist of the Trust Property.
"Trust Property" shall have the meaning specified in Section 2.1(b).
"Trustee" shall mean the institution executing this Agreement as trustee,
the successor to its corporate trust business, or its successor in interest, or
any successor trustee appointed as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
"Undivided Interest" shall mean the undivided interest of any
Certificateholder in the Trust.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
All terms defined in any Supplement or this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions of
all terms defined herein shall include the singular as well as the plural form
of such terms and the masculine of such terms as well as the feminine and
neuter genders of such terms. The terms "include", "including" or "includes"
shall mean including without limitation by way of enumeration or otherwise.
As used herein and in any certificate or other document made or delivered
pursuant hereto or thereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles on the date of determination. To the extent that the definitions of
accounting terms herein are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained herein
shall control.
The agreements and representations and warranties of Proffitt's, Inc. in
this Agreement in its capacity as Servicer, shall be deemed to be the
agreements, representations and warranties of Proffitt's, Inc. solely in such
capacity for so long as it acts in such capacity under this Agreement.
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The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to any Supplement or this Agreement as
a whole and not to any particular provision of such Supplement or this
Agreement, as the case may be; Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement or any
Supplement unless otherwise specified.
ARTICLE II
APPOINTMENT OF TRUSTEE;
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
SECTION 2.1 APPOINTMENT OF TRUSTEE; CONVEYANCE OF RECEIVABLES. (a) The
Transferor appoints and authorizes Norwest Bank Minnesota, National Association
to act as Trustee as provided herein and to exercise such powers under this
Agreement as are delegated to the Trustee by the terms hereof together with all
such powers, obligations and duties as are reasonably incidental thereto. The
Trustee hereby accepts such appointment and agrees to exercise such powers and
perform such functions on behalf of the Certificateholders from time to time as
are specifically delegated to the Trustee by the terms hereof.
(b) The Transferor does hereby transfer, assign, set-over, and otherwise
convey to the Trust for the benefit of the Certificateholders, without
recourse, all right, title and interest of the Transferor in and to the
Receivables, now existing and hereafter created, all monies due or to become
due with respect thereto (including all Finance Charges and Recoveries and
Interchange, if any) on and after the Cut-Off Date, and all proceeds of such
Receivables (including Insurance Proceeds). Such property, together with all
monies as are from time to time deposited in the Collection Account, the Excess
Funding Account and any other account or accounts maintained for the benefit of
the Certificateholders and all monies as are from time to time available under
any Enhancement for any Series for payment to Certificateholders shall
constitute the property of the Trust (the "Trust Property"). The foregoing
transfer, assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee or
any Certificateholder of any obligation of the Servicer, the Transferor, any
Seller, any Eligible Originator or any other Person in connection with the
Accounts, the Receivables or under any agreement or instrument relating thereto
including, without limitation, any obligation to any Obligors, merchant service
establishments or insurers.
In connection with such transfers, the Transferor agrees to record and
file, at its own expense, financing statements (and assignment and continuation
statements with respect to such financing statements when applicable) with
respect to the Receivables now existing and hereafter created for the transfer
of chattel paper, accounts and general
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intangibles (each as defined in the UCC in effect in the Relevant UCC State)
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect the transfers and assignments of the
Receivables by the Transferor to the Trust, and to deliver to the Trustee a
file-stamped copy of such financing statements or other evidence that such
filings were made on or prior to the Initial Closing Date.
In connection with such transfers, the Transferor agrees, at its own
expense, on or prior to the Initial Closing Date to cause the Servicer to
indicate or cause to be indicated clearly and unambiguously in the computer
files of the Transferor and the Sellers that the Receivables created in
connection with the Accounts (other than any Additional Account or any
Automatic Additional Account included pursuant to Section 2.6(d)) have been
sold and transferred to the Transferor pursuant to the Receivables Purchase
Agreements or otherwise and thereupon by the Transferor to the Trust pursuant
to this Agreement for the benefit of the Certificateholders. The Transferor
further agrees to deliver or cause to be delivered to the Trustee (a) on the
Initial Closing Date, a computer file, microfiche or written list containing a
true and complete list of all such Accounts, identified by account number and
by Receivable balance as of the Cut-Off Date and (b) so long as Automatic
Additional Accounts are being included pursuant to Section 2.6(d), on or prior
to the first Distribution Date that occurs after March 31, June 30, September
30 and December 31 of each year and otherwise at any time upon request of the
Trustee, a new computer file, microfiche or written list containing a true and
complete list of all Accounts identified as described in the preceding clause
(a) as of the last day of the most recent Monthly Period or an Officer's
Certificate stating that the file or list of Accounts most recently delivered
pursuant to this subsection remains a true and complete list of all Accounts.
Such file or list shall be marked as Schedule 1 to this Agreement, shall be
delivered to the Trustee as confidential and proprietary information belonging
solely to the Transferor and its Affiliates, and to be used by the Trustee
solely in pursuance of its duties hereunder, and is hereby incorporated into
and made a part of this Agreement. Any such additional file or list shall be
marked as Schedule 1 to this Agreement, shall be delivered to the Trustee as
confidential and proprietary information belonging solely to the Transferor and
its Affiliates, and to be used by the Trustee solely in pursuance of its duties
hereunder, shall replace the then existing Schedule 1 hereto, and shall be
incorporated into and made a part of this Agreement. The Transferor agrees, at
its own expense, by the end of the Monthly Period in which any Transferred
Accounts have been originated to cause the Servicer to indicate or cause to be
indicated clearly and unambiguously in the computer files of the Transferor and
the Sellers that the Receivables created in connection with the Transferred
Accounts have been transferred to the Transferor and thereupon transferred by
the Transferor to the Trust pursuant to this Agreement for the benefit of the
Certificateholders.
The Transferor hereby grants to the Trustee a first priority perfected
security interest in all of the Transferor's right, title and interest in and
to the Receivables, now existing and hereafter created, all monies due or to
become due with respect thereto on and after the Cut-Off Date (including all
Finance Charge Receivables and Recoveries), all proceeds of such Receivables,
such funds as are from time to time deposited in the
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Collection Account, the Excess Funding Account and any other account or
accounts maintained for the benefit of Certificateholders, and the benefits of
any Enhancement for any Series for payment to Certificateholders in order to
secure the payment of each Series (the "Obligations"). This Agreement shall
constitute a security agreement under applicable law.
Pursuant to the request of the Transferor, the Trustee has caused
Certificates in authorized denominations evidencing the entire interest in the
Trust to be duly authenticated and delivered to or upon the order of the
Transferor pursuant to Section 6.2.
SECTION 2.2 ACCEPTANCE BY TRUSTEE.
(a) The Trustee hereby acknowledges its acceptance, as and to the extent
transferred, assigned, set over or otherwise conveyed to the Trust as provided
in Section 2.1(b) hereof, on behalf of the Trust, of all right, title and
interest previously held by the Transferor in and to the Receivables, now
existing and hereafter created, all monies due or to become due with respect
thereto on and after the Cut-Off Date (including Recoveries), all proceeds of
such Receivables, such funds as are from time to time deposited in the
Collection Account and any other account or accounts maintained for the benefit
of Certificateholders, and the benefits of any Enhancement for any Series, and
declares that it shall hold such right, title and interest, upon the trust
herein set forth, and subject to the terms hereof for the benefit of all
Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the
Transferor delivered to the Trustee the computer file, microfiche or written
list represented by the Transferor to be the computer file, microfiche or
written list described in the third paragraph of Section 2.1(b).
(b) The Trustee hereby agrees not to use or disclose to any Person
(including any Certificateholder or Certificate Owner) any of the account
numbers, Obligor information or other information contained in the computer
files, microfiches or written lists delivered to the Trustee by the Transferor
pursuant to Sections 2.1 and 2.6, except as is required in connection with the
performance of its duties hereunder, or in connection with audits,
examinations, investigations and other inquiries which are required in
connection with the Trustee's regulatory supervision or in response to a court
order, subpoena, or other judicial or governmental demand or in enforcing the
rights of the Certificateholders or to a Successor Servicer appointed pursuant
to Section 10.2 or a successor Trustee appointed pursuant to Section 11.8. The
Trustee agrees to take such measures as shall be reasonably necessary or
reasonably requested by the Transferor to protect and maintain the security and
confidentiality of such information.
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
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SECTION 2.3 REPRESENTATIONS AND WARRANTIES REGARDING THE TRANSFEROR.
The Transferor hereby represents and warrants to the Trustee, on
behalf of the Trust, with respect to any Series of Certificates, as of the date
of the related Supplement and the related Closing Date, unless otherwise stated
in such Supplement that:
(i) Organization and Good Standing. The Transferor is a corporation,
duly incorporated, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has full power, authority and
legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted,
to execute, deliver and perform its obligations under this Agreement, any
Supplement hereto and the Receivables Purchase Agreements and to execute
and deliver to the Trustee the Certificates pursuant hereto.
(ii) Due Qualification. The Transferor is duly qualified to do
business and is in good standing (or is exempt from such requirements)
and has obtained all necessary licenses and approvals with respect to the
Transferor, in each jurisdiction in which failure to so qualify or to
obtain such licenses and approvals would render any Account Agreement
relating to an Account or any Receivable unenforceable by it or the Trust
or would have a material adverse effect on the Investor
Certificateholders or on the Transferor's or the Servicer's ability to
perform their respective obligations under this Agreement or any
Supplement; provided, however, that no representation or warranty is made
with respect to any qualifications, licenses or approvals which the
Trustee would have to obtain to do business in any state in which the
Trustee seeks to enforce any Receivable.
(iii) Due Authorization. The execution and delivery of this
Agreement and any Supplement and the execution and delivery to the
Trustee of the Certificates and the consummation of the transactions
provided for in this Agreement and any Supplement by the Transferor have
been duly authorized by the Transferor by all necessary corporate action
on the part of the Transferor.
(iv) No Violation. The execution and delivery of this Agreement, any
Supplement and the Certificates by the Transferor, the performance by the
Transferor of the transactions contemplated by this Agreement and any
Supplement and the fulfillment by the Transferor of the terms hereof and
thereof will not conflict with, violate or result in any breach of any of
the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any Requirement of Law
applicable to the Transferor or any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which the Transferor is a
party or by which it
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or any of its properties are bound and which conflict, violation, breach
or default would have a material adverse effect on the Transferor.
(v) No Proceedings. There are no proceedings or investigations
pending or, to the knowledge of the Transferor, threatened against the
Transferor before any court, regulatory body, administrative agency,
arbitrator or other tribunal or governmental instrumentality (i)
asserting the invalidity of this Agreement, any Supplement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement, any Supplement or the Certificates, (iii) seeking any
determination or ruling that, in the reasonable judgment of the
Transferor, would materially and adversely affect the performance by the
Transferor of its obligations under this Agreement or any Supplement,
(iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement, any
Supplement or the Certificates or (v) seeking to affect adversely the
federal income tax attributes of the Trust.
(vi) Eligibility of Accounts. As of the applicable Cut-Off Date or
Additional Account Cut-Off Date, each Account was an Eligible Account and
no selection procedures adverse to the Investor Certificateholders have
been employed in selecting the Accounts.
(vii) All Consents Required. All approvals, authorizations,
consents, orders or other actions of any Person or of any Governmental
Authority required to be obtained on or prior to the date as of which
this representation is being made in connection with the execution and
delivery by the Transferor of this Agreement, any Supplement and the
Certificates, the performance by the Transferor of the transactions
contemplated by this Agreement and any Supplement and the fulfillment by
the Transferor of the terms hereof and thereof, have been obtained;
provided, however, that no representation or warranty is made regarding
state securities or "blue sky" laws in connection with any offer or sale
of the Certificates.
(viii) Amount of Receivables; Computer File. As of the Cut-Off Date,
the amount of Receivables was $__________. The computer files, microfiche
or written list delivered pursuant to Section 2.1 hereof is complete and
accurately reflects the information regarding the Receivables under the
Accounts in all material respects as of the applicable time referred to
in Section 2.1.
(ix) No Insolvency. The Transferor is not insolvent
immediately prior to any transfer of Accounts and Receivables
hereunder, and will not be rendered insolvent immediately
following such transfer.
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(x) No Investment Company. The Transferor is not an investment
company subject to registration or regulation under the 1940 Act.
In the event the Bank or another Affiliate of the Company is
substituted for PCC as Transferor, such Affiliate shall, immediately prior to
becoming the Transferor, make the representations and warranties set forth in
this Section 2.3, as of the date of its becoming the Transferor, in an
Officer's Certificate delivered to the Trustee and the Rating Agencies. The
representations and warranties set forth in this Section 2.3 shall survive the
transfer and assignment of the Receivables to the Trust. Upon discovery by the
Transferor, the Servicer or the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.3, the party
discovering such breach shall give prompt written notice thereof to the others.
SECTION 2.4 REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR
RELATING TO THE AGREEMENT AND ANY SUPPLEMENT AND THE RECEIVABLES.
(a) Binding Obligation; Valid Transfer and Assignment. The
Transferor hereby represents and warrants to the Trustee, on behalf of the
Trust, with respect to any Series of Certificates, as of the Cut-Off Date or
the date of the related Supplement and the related Closing Date, unless
otherwise stated in such Supplement that:
(i) Each of this Agreement and any Supplement constitutes a legal,
valid and binding obligation of the Transferor, enforceable against the
Transferor in accordance with its terms, subject to applicable
bankruptcy, insolvency, receivership, conservatorship, reorganization,
moratorium or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights in general and the rights of creditors
of national banking associations and except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity).
(ii) This Agreement or, in the case of Receivables in Additional
Accounts, the related Assignment constitutes either (A) a valid transfer
and assignment to the Trust of all right, title and interest of the
Transferor in and to the Receivables now existing and hereafter created
and (x) acquired by the Transferor pursuant to the Receivables Purchase
Agreements or (y) originated by the Bank, all monies due or to become due
with respect thereto (including all Finance Charge Receivables,
Recoveries, Interchange, if any, and amounts held in any of the accounts
established for the benefit of Certificateholders) on and after the
Cut-Off Date or Additional Account Cut-Off Date or Creation Date, as
applicable, and all proceeds (as defined in the UCC as in effect in the
Relevant UCC State) of such Receivables, and such Receivables and all
proceeds thereof will be held by the Trust free and clear of any Lien of
any Person claiming through or under the
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Transferor or any of its Affiliates except for (a) Liens permitted under
Section 2.5(b), (b) the interest of the Transferor as holder of the
Exchangeable Transferor Certificate or any other class of Certificates
held by the Transferor from time to time and (c) any right of the holder
of the Exchangeable Transferor Certificate to receive interest accruing
on, and investment earnings (net of investment losses and expenses) with
respect to, the Collection Account and any other account or accounts
maintained for the benefit of Certificateholders or any Enhancement
Provider, if any, as provided in this Agreement and any Supplement, or
(B) a grant of a security interest (as defined in the UCC as in effect in
the Relevant UCC State) in such property to the Trustee on behalf of the
Trust, which is enforceable with respect to existing Receivables (other
than Receivables in Additional Accounts) and the proceeds thereof (to the
extent set forth in Section 9-306 of the UCC in effect in the Relevant
UCC State) upon execution and delivery of this Agreement, and which will
be enforceable with respect to such Receivables thereafter created, and
the proceeds thereof to such extent, upon such creation. If this
Agreement constitutes the grant of a security interest to the Trust in
such property, upon the filing of the applicable financing statements and
in the case of the Receivables hereafter created and proceeds thereof
upon such creation, the Trust shall have a first priority perfected
security interest in such property and the proceeds thereof (to the
extent set forth in Section 9-306 of the UCC in effect in the Relevant
UCC State), except for Liens permitted under Section 2.5(b). Except as
otherwise specifically provided in this Agreement or any Supplement,
neither the Transferor nor any Person claiming through or under the
Transferor shall (other than as a result of such Person being a Holder of
Certificates) have any claim to or interest in the Collection Account or
any other account or accounts maintained for the benefit of
Certificateholders or any Enhancement Provider, except for any right of
the Transferor to receive interest accruing on, and investment earnings
with respect to, any such account as provided in this Agreement and any
Supplement and, if this Agreement constitutes the grant of a security
interest in such property, except for the interest of the Transferor in
such property as a debtor for purposes of the UCC as in effect in the
Relevant UCC State.
(b) Eligibility of Receivables. The Transferor hereby represents and
warrants to the Trustee, on behalf of the Trust, as of the Cut-Off Date or
Creation Date, as applicable, and in the case of Receivables in Additional
Accounts, as of the related Additional Account Cut-Off Date, that (i) each
Receivable then existing is an Eligible Receivable, and (ii) as of the Initial
Closing Date, and, as of the applicable Additional Account Cut-Off Date with
respect to Additional Accounts, and as of the applicable Distribution Date on
which a computer file, microfiche or written list is delivered pursuant to
Section 2.1(b) with respect to Automatic Additional Accounts included
automatically pursuant to Section 2.6(d), Schedule 1 to this Agreement is in
all material respects an accurate and complete
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listing of all the Accounts as of the Cut-Off Date or the applicable Additional
Account Cut-Off Date or the applicable Creation Date, as the case may be, and
the information contained therein with respect to the identity of such Accounts
and the Receivables existing thereunder is true and correct in all material
respects as of such applicable Cut-Off Date or Additional Account Cut-Off Date
or Creation Date. On each day on which any new Receivable is created, the
Transferor shall be deemed to represent and warrant to the Trust that each
Receivable created on such day is an Eligible Receivable.
(c) Notice of Breach. The representations and warranties set forth in this
Section 2.4 shall survive the transfer and assignment of the Receivables to the
Trust and the termination of the rights and obligations of the Servicer
pursuant to Section 10.1. Upon discovery by the Transferor, the Servicer or the
Trustee of a breach of any of the representations and warranties set forth in
this Section 2.4, the party discovering such breach shall give prompt written
notice thereof to the others.
(d) Transfer of Ineligible Receivables.
(i) Automatic Removal. In the event that a Receivable is not an
Eligible Receivable as a result of the failure to satisfy the conditions
set forth in clause (iv) of the definition of Eligible Receivable, and
either of the following two conditions is met:
(A) the Lien upon the subject Receivable (1) ranks prior to
the Lien created pursuant to this Agreement, (2) arises in
favor of the United States of America or any state or any
agency or instrumentality thereof or involves taxes or
liens arising under Title IV of ERISA, or (3) has been
consented to by the Transferor; or
(B) the Lien on the subject Receivable is not of the types
described in clause (A) above, but, as a result of such
breach or event, such Receivable becomes a Receivable in a
Defaulted Account or the Trust's rights in, to or under
such Receivable or its proceeds are materially impaired or
the proceeds of such Receivable are not available for any
reason to the Trust free and clear of any Lien except Liens
permitted pursuant to Section 2.5(b);
then, upon the earlier to occur of the discovery of such breach or event
by the Transferor or the Servicer or receipt by the Transferor or the
Servicer of written notice of such breach or event given by the Trustee,
each such Receivable or, at the option of the Transferor, all such
Receivables with respect to the related Account, automatically shall be
removed from the Trust on the terms and conditions set forth in Section
2.4(d)(iii).
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(ii) Removal after Cure Period. In the event of a breach of any of
the representations and warranties set forth in Section 2.4(b)(i) or (ii)
with respect to a Receivable (other than in the event that a Receivable
is not an Eligible Receivable as a result of the failure to satisfy the
conditions set forth in clause (iv) of the definition of Eligible
Receivable), and as a result of such breach or event such Receivable
becomes a Receivable in a Defaulted Account or the Trust's rights in, to
or under such Receivable or its proceeds are materially impaired or the
proceeds of such Receivable are not available for any reason to the Trust
free and clear of any Lien except Liens permitted pursuant to Section
2.5(b), then, upon the expiration of 90 days or any longer period agreed
upon by the Trustee (not to exceed an additional 90 days) from the
earlier to occur of the discovery of any such event by the Transferor or
the Servicer or receipt by the Transferor or the Servicer of written
notice of any such event given by the Trustee, each such Receivable or,
at the option of the Transferor, all such Receivables with respect to the
related Account, shall be removed from the Trust on the terms and
conditions set forth in Section 2.4(d)(iii); provided, however, that no
such removal shall be required to be made if, on any day within such
applicable period, (A) such representation and warranty with respect to
such Receivable shall then be true and correct in all material respects
as if such Receivable had been transferred to the Trust on such day, and
(B) the related Account is no longer a Defaulted Account as the result of
the breach of such representation and warranty, and the Trust's rights
in, to or under such Receivable or its proceeds are no longer materially
impaired as a result of a breach of such representation and warranty, and
the proceeds of such Receivable are available to the Trust free and clear
of all Liens resulting in the breach of such representation and warranty,
as applicable.
(iii) Removal Terms and Conditions. When required or permitted with
respect to a Receivable by the provisions of Section 2.4(d)(i) or Section
2.4(d)(ii) (an "Ineligible Receivable"), the Transferor shall accept
reassignment of such Ineligible Receivable by directing the Servicer to
deduct the principal balance of such Ineligible Receivable from the
Aggregate Principal Receivables and to decrease the Transferor Amount by
such amount. On and after the date of such removal, each Ineligible
Receivable shall be deducted from the Aggregate Principal Receivables
used in the calculation of any Investor Percentage, the Transferor
Percentage or the Transferor Amount. In the event that the exclusion of
an Ineligible Receivable from the calculation of the Transferor Amount
would cause the Transferor Amount to be reduced below the Minimum
Transfer Amount (after giving effect to the addition of any Principal
Receivables to the Trust) or would otherwise not be permitted by law, the
Transferor shall immediately deposit into the Excess Funding Account in
immediately available funds an amount equal to the amount by which the
Transferor Amount would be reduced below the Minimum Transfer Amount (or
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designate Additional Accounts pursuant to Section 2.6(b) for inclusion as
Accounts no later than 10 Business Days after such event). Any such
deposit into the Excess Funding Account in connection with the
reassignment of an Ineligible Receivable shall be considered a payment in
full of the Ineligible Receivable and such deposit shall be applied in
accordance with the provisions of Article IV. Upon the reassignment to
the Transferor of an Ineligible Receivable, the Trust shall, without
further action, be deemed to transfer, assign, set-over and otherwise
convey to the Transferor, without recourse, representation or warranty,
all the right, title and interest of the Trust in and to such Ineligible
Receivable, all monies due or to become due with respect thereto and all
proceeds thereof. The Trustee shall execute such documents and
instruments of transfer or assignment as are prepared by the Transferor
and take such other actions as shall reasonably be requested by the
Transferor to effect the conveyance of such Ineligible Receivable
pursuant to this subsection. In the event that on any day within 90 days,
or any longer period agreed upon by the Trustee (not to exceed an
additional 90 days), of the date on which the removal of Receivables
which are not Eligible Receivables from the Trust pursuant to this
Section is effected, (A) the applicable representations and warranties
with respect to such Receivable shall be true and correct in all material
respects on such date and (B) the Receivable is an Eligible Receivable,
the related Account is no longer a Defaulted Account and the Trust's
rights in, to or under such Receivable or its proceeds are no longer
materially impaired as a result of the breach of such representation and
warranty and the proceeds of such Receivable are available to the Trust
free and clear of all Liens resulting in the breach of such
representation and warranty, the Transferor may, but shall not be
required to, direct the Servicer to include such Receivable in the Trust.
Upon reinclusion of a Receivable in the Trust pursuant to this
subsection, the Transferor shall be deemed to make the applicable
representations and warranties in Section 2.4(b) as of the date of such
addition, as if the Receivable had been created on such date, and shall
execute all such necessary documents and instruments of transfer or
assignment and take such other actions as shall be necessary to effect
and perfect the reconveyance of such Receivable to the Trust. The
obligation of the Transferor set forth in this subsection shall
constitute the sole remedy respecting any breach by the Transferor of the
representations and warranties set forth in the above-referenced
subsections with respect to such Receivable available to
Certificateholders or the Trustee on behalf of Certificateholders.
Notwithstanding any other provision of this Section 2.4(d), a
reassignment of an Ineligible Receivable shall not occur if the Transferor
fails to make a deposit or designation of Additional Accounts required by this
Section 2.4(d) with respect to such Ineligible Receivable.
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(iv) No Impairment. For the purposes of Sections 2.4(d)(i) and
2.4(d)(ii), proceeds of a Receivable shall not be deemed to be impaired
hereunder solely because such proceeds are held by the Servicer for more
than the applicable period under Section 9-306(3) of the UCC as in effect
in the Relevant UCC State.
(e) Reassignment of Trust Portfolio. In the event of a breach of any of
the representations or warranties set forth in Sections 2.3(i), 2.3(iii),
2.4(a) or 2.4(b) or a material amount of Receivables are not Eligible
Receivables, and such event has a materially adverse effect on Investor
Certificateholders (without regard to the amount of any Enhancement), either
the Trustee or the Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Aggregate Investor Amount, by notice
then given in writing to the Transferor (and to the Trustee and the Servicer,
if given by the Investor Certificateholders), may direct the Transferor to
accept reassignment of all Receivables within 90 days of such notice, or within
such longer period as may be specified in such notice not to exceed an
additional 90 days and the Transferor shall be obligated to accept such
reassignment on a Distribution Date specified by the Transferor occurring
within such applicable period on the terms and conditions set forth below;
provided, however, that no such reassignment shall be required to be made, and
the Transferor shall not be obligated to accept such reassignment, if, at any
time during such applicable period, the representations and warranties
contained in Section 2.3(i), 2.3(iii) and 2.4(a) shall then be true and correct
in all material respects, or there shall no longer be a material amount of
Receivables which are not Eligible Receivables, as the case may be. The
Transferor shall deposit in the Collection Account on the Business Day
immediately prior to such Distribution Date (in immediately available funds) an
amount equal to the reassignment deposit amount for such Receivables for
distribution pursuant to the provisions of Section 12.3. The deposit amount for
such reassignment shall be equal to the Aggregate Investor Amount at the end of
the Business Day preceding the Distribution Date with respect to which such
deposit is made (less the aggregate principal amount, if any, held in the
Excess Funding Account and any Principal Account relating to any Series on such
Distribution Date), plus (i) an amount equal to all accrued but unpaid interest
on the Certificates of all Series at the applicable Certificate Rates through
the end of the respective interest accrual period(s) of such Series and (ii)
any other unpaid amounts with respect to such Certificates. Payment of the
reassignment deposit amount and all other amounts in the Collection Account in
respect of the preceding Monthly Period shall be considered a prepayment in
full of all such Receivables. On the Distribution Date with respect to which
such amount has been deposited in full into the Collection Account, the
Receivables and all monies due or to become due with respect thereto and all
proceeds relating thereto shall be released to the Transferor and the Trustee
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, representation or warranty, as shall reasonably be
requested by the Transferor to vest in the Transferor or its designee or
assignee, all right, title and interest of the Trust in and to the Receivables,
all monies due or to become due with respect thereto and all proceeds thereof.
If the Trustee or the Investor Certificateholders give a notice directing the
Transferor to accept reassignment as provided herein and the Transferor is
obligated to
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accept such reassignment as provided herein, then such obligation of the
Transferor shall constitute the sole remedy respecting a breach of the
representations and warranties contained in Section 2.3(i), 2.3(iii) or 2.4(a)
or there being a material amount of Receivables which are not Eligible
Receivables available to the Investor Certificateholders or the Trustee on
behalf of the Investor Certificateholders.
(f) Nothing contained in this Section 2.4 shall create an obligation on
the part of the Trustee to verify the accuracy or continued accuracy of the
representations or warranties contained in this Section 2.4. The Trustee shall
have no obligation to give any notice pursuant to this Section 2.4 unless a
Responsible Officer of the Trustee has actual knowledge of facts which would
permit the giving of such notice.
SECTION 2.5 COVENANTS OF THE TRANSFEROR AND THE SERVICER. The
Transferor and the Servicer hereby each covenant as follows:
(a) Receivables Not to be Evidenced by Instruments. The Transferor and the
Servicer will take no action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the Relevant UCC State).
(b) Security Interests. Except for the conveyances hereunder, the
Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; the
Transferor will notify the Trustee of the existence of any Lien on any
Receivable transferred by the Transferor immediately upon discovery thereof;
and the Transferor will defend the right, title and interest of the Trust in,
to and under the Receivables, whether now existing or hereafter created,
against all claims of third parties claiming through or under the Transferor;
provided, however, that nothing in this Section 2.5(b) shall prevent or be
deemed to prohibit the Transferor from suffering to exist upon any of the
Receivables any Liens for state, municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the
time be due and payable or if the Transferor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves under generally accepted accounting
principles with respect thereto; and provided, further, that nothing in this
subsection shall prohibit the Transferor from conveying an interest in the
Exchangeable Transferor Certificate in accordance with Section 6.3(b) hereof.
(c) Account Agreements and Credit Card Guidelines. The Transferor and the
Servicer shall comply, and shall cause the Eligible Originators to comply with
and perform, their respective obligations under the applicable Account
Agreements relating to the Accounts and the Credit Card Guidelines except
insofar as any failure so to comply or perform would not materially and
adversely affect the rights of the Trust or the Investor Certificateholders
hereunder (without regard to the amount of any Enhancement) or under the
Certificates. Subject to compliance with all Requirements of Law, the failure
to comply with which would have a material adverse effect on the Investor
Certificateholders (without regard to the amount of any Enhancement), the
Transferor or the Servicer may
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change, or cause any Eligible Originator to change, the terms and provisions of
the Account Agreements or the Credit Card Guidelines in any respect (including,
without limitation, the calculation of the amount, or the timing, of charge
offs) as follows: (a) if the Transferor owns a comparable segment of accounts,
then such change shall be made applicable to such comparable segment of the
accounts owned and serviced by the Transferor that have characteristics the
same as, or substantially similar to, the Accounts that are the subject of such
change, and (ii) if the Transferor or the applicable Eligible Originator does
not own such a comparable segment, then the Transferor will not make or cause
to be made any such change with the intent to materially benefit the Transferor
over the Investor Certificateholders.
(d) Account Allocations. In the event that the Transferor is unable for
any reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement (including, without limitation, by reason of the
application of the provisions of Section 9.2 or an order by any Federal
governmental agency having regulatory authority over the Transferor or an order
of any court of competent jurisdiction that the Transferor not transfer any
additional Receivables to the Trust) then, in any such event, (A) the
Transferor agrees (except as prohibited by any such order) to allocate and pay
to the Trust, after the date of such inability, all Collections (including
Collections of Finance Charge Receivables) with respect to Principal
Receivables transferred to the Trust prior to the occurrence of such event, and
all amounts which would have constituted Collections (including Collections of
Finance Charge Receivables) with respect to such Receivables which would have
been Principal Receivables but for the Transferor's inability to transfer such
Receivables to the Trust (up to an aggregate amount equal to the Aggregate
Principal Receivables in the Trust on such date); (B) the Transferor agrees to
have such amounts applied as Collections in accordance with Article IV; and (C)
for only so long as the allocation and application of such Collections and all
amounts which would have constituted Collections are made in accordance with
clauses (A) and (B) above, Collections of Principal Receivables and all amounts
which would have constituted Collections of Principal Receivables but for the
Transferor's inability to transfer Receivables to the Trust which are charged
off as uncollectible in accordance with this Agreement and the Credit Card
Guidelines shall continue to be allocated in accordance with Article IV and all
amounts which would have constituted Collections of Principal Receivables but
for the Transferor's inability to transfer Receivables to the Trust shall be
deemed to be Collections of Principal Receivables for the purpose of
calculating the applicable Investor Percentage and the Aggregate Investor
Percentage thereunder. If the Transferor is unable pursuant to any Requirement
of Law to allocate Collections as described above, the Transferor agrees that
it shall, in any such event, and to the extent not prohibited by law, allocate,
after the date that the Transferor becomes unable to allocate Collections as
described above, payments on each Account with respect to the balance of such
Account first to the oldest Receivable in such Account and to have such
payments applied as Collections in accordance with Article IV.
(e) Delivery of Collections. In the event that the Transferor receives
Collections, the Transferor agrees to pay to the Servicer all payments received
by the Transferor with
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respect to Collections on the Receivables promptly after receipt thereof by the
Transferor, but in no event later than two (2) Business Days after the receipt
by the Transferor thereof.
(f) Minimum Net Worth of Transferor.
(i) On the date of this Agreement, the Transferor shall have a Net
Worth of at least $10,000,000.
(ii) The Transferor shall make no distributions of dividends or
returns of capital comprising its Net Worth except to the extent that,
after giving effect thereto, the Transferor shall have a Net Worth at
least equal to 10% of the highest balance of Aggregate Principal
Receivables outstanding with respect to the immediately preceding twelve
(12) calendar month period.
(g) Separate Business. Unless the Bank is serving as Transferor, the
Transferor, shall at all times (a) to the extent the Transferor's office
is located in the offices of Proffitt's, Inc. or any Affiliate of
Proffitt's, Inc., pay fair market rent for its executive office space
located in the offices of Proffitt's, Inc., or any Affiliate of
Proffitt's, Inc., (b) have at all times at least two members of its board
of directors who are not and, within the immediately preceding two (2)
years, have not been employees, officers or directors of Proffitt's,
Inc., or any Affiliate of Proffitt's, Inc. or of any major creditor of
Proffitt's, Inc. or any Affiliate of Proffitt's, Inc. and are persons who
are familiar and have experience with asset securitization, (c)
maintain the Transferor's books, financial statements, accounting records
and other corporate documents and records separate from those of
Proffitt's, Inc. or any other entity, (d) not commingle the Transferor's
assets with those of Proffitt's, Inc. or any other entity, (e) act solely
in its corporate name and through its own authorized officers and agents,
(f) make investments directly or by brokers engaged and paid by the
Transferor or its agents (provided that if any such agent is an Affiliate
of the Transferor it shall be compensated at a fair market rate for its
services), (g) separately manage the Transferor's liabilities from those
of Proffitt's, Inc. or any Affiliates of Proffitt's, Inc. and pay its own
liabilities, including all administrative expenses, from its own separate
assets, except that Proffitt's, Inc. may pay the organizational expenses
of the Transferor, and (h) pay from the Transferor's assets all
obligations and indebtedness of any kind incurred by the Transferor. The
Transferor shall abide by all corporate formalities, including the
maintenance of current minute books, and the Transferor shall cause its
financial statements to be prepared in accordance with generally accepted
accounting principles in a manner that indicates the separate existence
of the Transferor and its assets and liabilities. Except as provided
herein or in the Receivables Purchase Agreements the Transferor shall (i)
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pay all its liabilities, (ii) not assume the liabilities of Proffitt's,
Inc. or any Affiliate of Proffitt's, Inc., (iii) not lend funds or extend
credit to Proffitt's, Inc., or any Affiliate of Proffitt's, Inc., except
pursuant to a Receivables Purchase Agreement in connection with the
purchase of Receivables thereunder, (iv) not guarantee the liabilities of
Proffitt's, Inc., or any Affiliates of Proffitt's, Inc., and (v) not own
the stock of, or any other beneficial interest in, any subsidiaries or
any other entity. The officers and directors of the Transferor (as
appropriate) shall make decisions with respect to the business and
operations of the Transferor independent of and not dictated by any
controlling entity. The Transferor shall not engage in any business not
permitted by its certificate or articles of incorporation as in effect on
the date hereof, provided such certificate or articles may be amended or
changed subject only to the Rating Agency Conditions.
SECTION 2.6 ADDITION OF ACCOUNTS; REPURCHASE OF INVESTOR
CERTIFICATES.
(a) If, (1) as of the end of any Monthly Period, the Transferor Amount is
less than the Minimum Transferor Amount, the Transferor shall either (i) cause
the Trust to repurchase Investor Certificates (to the extent permitted by and
in accordance with the terms of any Supplement with respect to any Series) or
(ii) designate additional Eligible Accounts (the "Additional Accounts") to be
included as Accounts, in either case in a sufficient amount such that the
Transferor Amount as of the end of such Monthly Period after giving effect to
such repurchase or addition would have equaled or exceeded the Minimum
Transferor Amount or (2) as of the end of any Monthly Period, the Aggregate
Principal Receivables are less than the Minimum Aggregate Principal
Receivables, then the Transferor shall designate Additional Accounts to be
included as Accounts in a sufficient amount such that the Aggregate Principal
Receivables after giving effect to such designations would have been equal to
or greater than the Minimum Aggregate Principal Receivables. Receivables from
such Additional Accounts shall be transferred to the Trust on or before 10 days
following the Determination Date following such Monthly Period (the "Additional
Account Closing Date"). Failure either (i) to cause the Trust to repurchase
Investor Certificates if permitted pursuant to any Supplement or (ii) to add
Additional Accounts as required by this Section 2.6(a), shall be a Pay Out
Event with respect to the affected Series.
(b) In addition to its obligation under Section 2.6(a), the Transferor
may, but shall not be obligated to, designate from time to time Additional
Accounts to be included as Accounts.
(c) The Transferor agrees that any such transfer of Receivables from
Additional Accounts under Section 2.6(a) or (b) shall satisfy the following
conditions:
(i) On or before the fifth Business Day prior to the Additional
Account Closing Date, the Transferor shall give the Trustee and the
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Servicer written notice that such Additional Accounts will be included
and specifying the approximate aggregate amount of the Receivables to be
transferred;
(ii) On or prior to the Additional Account Closing Date, the
Transferor shall have delivered to the Trustee a written assignment (and
the Trustee shall have accepted such assignment on behalf of the Trust
for the benefit of the Investor Certificateholders and any Enhancement
Provider) in substantially the form of Exhibit B (the "Assignment") and
shall have clearly indicated in its computer files that the Receivables
created in connection with the Additional Accounts have been transferred
to the Trust and the Transferor shall have delivered to the Trustee a
computer file, microfiche or written list represented by the Transferor
to contain a true and complete list of all Additional Accounts identified
by account number and by Receivable balance in such Additional Accounts
as of the Additional Account Cut-Off Date, which computer file,
microfiche or written list shall be as of the date of such Assignment
incorporated into and made a part of such Assignment and this Agreement;
(iii) The Transferor shall represent and warrant that (x) each
Additional Account was, as of the Additional Account Cut-Off Date, an
Eligible Account, (y) no selection procedures believed by the Transferor
to be materially adverse to the interests of any outstanding Series of
Investor Certificates or any Enhancement Provider were utilized in
selecting the Additional Accounts from the available Eligible Accounts in
the Transferor's portfolio; and (z) as of the Additional Account Closing
Date, the Transferor is not insolvent and will not be made insolvent by
the transfer of the Receivables of such Additional Accounts;
(iv) The Transferor shall represent and warrant that, as of the
Additional Account Closing Date, the Assignment constitutes either (A) a
valid transfer and assignment to the Trust of all right, title and
interest of the Transferor in and to the Receivables then existing and
thereafter created in the Additional Accounts, all monies due or to
become due with respect thereto on and after the Additional Account
Cut-Off Date, Recoveries and all proceeds of such Receivables (to the
extent set forth in Section 9-306 of the UCC as in effect in the Relevant
UCC State), and such Receivables and all proceeds thereof will be
conveyed to the Trust free and clear of any Lien of any Person claiming
through or under the Transferor or any of its Affiliates, except for (x)
Liens permitted under Section 2.5(b) hereunder, (y) the interest of the
holder of the Exchangeable Transferor Certificate or any other Class of
Certificate held by the Transferor from time to time and (z) any right of
the holder of the Exchangeable Transferor Certificate to receive interest
accruing on, and investment earnings with respect to, the Collection
Account and any other
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account or accounts maintained for the benefit of Certificateholders or
any Enhancement Provider, if any, as provided in this Agreement and any
Supplement, or (B) a grant of a security interest (as defined in the UCC
as in effect in the Relevant UCC State) in such property to the Trustee
on behalf of the Trust, which is enforceable with respect to then
existing Receivables of the Additional Accounts, and the proceeds thereof
(to the extent set forth in Section 9-306 of the UCC as in effect in the
Relevant UCC State), upon the conveyance of such Receivables to the
Trust, and which will be enforceable with respect to the Receivables
thereafter created in respect of Additional Accounts, and the proceeds
thereof (to the extent set forth in Section 9-306 of the UCC as in effect
in the Relevant UCC State), upon such creation; and (C) if the Assignment
constitutes the grant of a security interest to the Trust in such
property, upon the filing of financing statements as described in Section
2.1 with respect to such Additional Accounts and in the case of such
Receivables of Additional Accounts thereafter created and the proceeds
thereof (to the extent set forth in Section 9-306 of the UCC in effect in
the Relevant UCC State) upon such creation, the Trust shall have a first
priority perfected security interest in such property, except for Liens
permitted under Section 2.5(b) hereunder;
(v) The Transferor shall deliver to the Trustee (with a copy to
the Rating Agencies), an Officer's Certificate confirming the items set
forth in paragraphs (ii), (iii) and (iv) above and paragraph (vii) below.
The Trustee may conclusively rely on such Officer's Certificate, shall
have no duty to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying;
(vi) The Transferor shall deliver to the Trustee and each Rating
Agency, an Opinion of Counsel with respect to the Receivables in the
Additional Accounts substantially in the form of Part One of Exhibit G;
(vii) The Transferor shall record and file financing statements with
respect to the Receivables then existing and thereafter created in the
Additional Accounts for the transfer of accounts, general intangibles and
chattel paper (each as defined in the UCC in effect in the Relevant UCC
State) meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the transfer and
assignment of the Receivables in Additional Accounts by the Transferor to
the Trust; and
(viii) The Rating Agencies shall have received from the Transferor
five (5) Business Days' notice, in the case of Additional Accounts being
added pursuant to Section 2.6(a), and ten (10) Business Days' notice, in
the case of Additional Accounts being added pursuant to Section 2.6(b),
of
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such proposed addition of Additional Accounts and, in the event that
Additional Accounts are being added pursuant to Section 2.6(b), the
Rating Agency Condition shall have been satisfied.
(d)(i)The Transferor may from time to time, at its sole discretion, subject to
and in compliance with the limitations and conditions specified below,
(x) designate Eligible Accounts to be included as Accounts as of the
applicable Creation Date ("Automatic Additional Accounts"), and (y) may
at any time discontinue or suspend designating Eligible Accounts to be
included as Automatic Additional Accounts upon written notice to the
Trustee. For purposes of this paragraph, Eligible Accounts shall be
deemed to include only Eligible Accounts (x) of a type included as
Accounts on the Initial Closing Date or any Additional Account Closing
Date or consented to in writing by each Rating Agency and (y) not
prohibited from being included as Accounts pursuant to the terms of any
Supplement. The Transferor acknowledges and agrees with the Trustee, for
the benefit of all Investor Certificateholders of all Series, that each
Account originated or acquired by the Transferor on or after the Cut Off
Date, shall be considered to be Automatic Additional Accounts
constituting Accounts, each within the meaning of the Agreement, on and
as of the applicable Creation Date of each such Account.
(ii) The Transferor shall not be permitted to designate Automatic
Additional Accounts pursuant to clause (i) above with respect to any
period of the three consecutive Monthly Periods commencing in January,
April, July or October of a calendar year, commencing in October 1997,
unless Standard & Poor's and Moody's otherwise consents in writing, if
the number of Automatic Additional Accounts designated during such period
or during any period of twelve (12) consecutive Monthly Periods would
exceed the applicable Aggregate Automatic Addition Limit.
(iii) The Transferor shall record and file financing statements with
respect to the Receivables then existing and thereafter created in the
Automatic Additional Accounts for the transfer of accounts, general
intangibles and chattel paper (each as defined in the UCC in effect in
the Relevant UCC State) meeting the requirements of applicable state law
in such manner and in such jurisdictions as are necessary to perfect the
transfer and assignment of the Receivables in Automatic Additional
Accounts by the Transferor to the Trust.
SECTION 2.7 REMOVAL OF ACCOUNTS.
(a) Subject to the conditions set forth below, during the Revolving
Period, the Transferor may, but shall not be obligated to, designate, from time
to time, Accounts for
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deletion and removal ("Removed Accounts") from the Accounts and accept
reconveyance of all Receivables in the Removed Accounts without notice to the
Investor Certificateholders; provided, however, that the Transferor shall not
make more than one such designation in any Monthly Period. On or before the
tenth Business Day (the "Removal Notice Date") prior to the date on which the
designated Removed Accounts will be reassigned by the Trustee to the Transferor
(the "Removal Date"), the Transferor shall give the Trustee and the Servicer
written notice that the Receivables from such Removed Accounts are to be
reassigned to the Transferor.
(b) The Transferor shall be permitted to designate and require
reassignment to it of Receivables from Removed Accounts only upon satisfaction
of the following conditions:
(i) On or prior to the Removal Date, the Transferor shall have
delivered or caused to be delivered to the Trustee for execution a
written instrument of reassignment in substantially the form of Exhibit C
(the "Reassignment") and a computer file, microfiche or written list
containing a true and complete list of all Removed Accounts identified by
account number and by the aggregate balance of the Receivables in such
Removed Accounts as of the Removal Notice Date, which computer file,
microfiche or written list shall as of the Removal Date modify, amend and
be made a part of this Agreement;
(ii) The Transferor shall represent and warrant that no
selection procedures believed by the Transferor to be materially adverse
to the interests of the Certificate Owners of any outstanding Series of
Investor Certificates or any Enhancement Provider were utilized in
selecting the Removed Accounts;
(iii) The removal of any Receivables of any Removed Accounts on any
Removal Date shall not, (a) in the reasonable belief of the Transferor,
result in a Pay Out Event or (b) cause the Transferor Amount to be less
than the Minimum Transferor Amount, and the aggregate amount of Principal
Receivables in the Trust shall not be less than the Minimum Aggregate
Principal Receivables;
(iv) The Rating Agencies shall have delivered to the Transferor a
letter confirming that the Rating Agency Condition has been satisfied;
and
(v) The Transferor shall deliver to the Trustee (with a copy to the
Rating Agencies) an Officer's Certificate confirming the items set forth
in paragraphs (i) through (iv) above. The Trustee may conclusively rely
on such Officer's Certificate, shall have no duty to make inquiries with
regard to the matters set forth therein and shall incur no liability in
so relying.
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Upon satisfaction of the above conditions, the Trustee shall execute and
deliver the Reassignment to the Transferor and take all actions and make all
deliveries contemplated therein, and the Receivables from the Removed Accounts
shall no longer constitute a part of the Trust.
SECTION 2.8 DISCOUNT OPTION RECEIVABLES.
(a) The Transferor has initially designated a percentage (the "Discount
Percentage") of the amount of Receivables arising in the Accounts that
otherwise would be treated as Principal Receivables to be treated as Finance
Charge Receivables ("Discount Option Receivables") in accordance with the
provisions of this Section 2.8. The Discount Percentage shall not apply to
Finance Charges or to Receivables in Defaulted Accounts. The Discount
Percentage may be fixed or variable, and the Transferor has designated 2% as
the initial Discount Percentage.
(b) Discount Option Receivables shall be considered Finance Charge
Receivables for all purposes hereunder, including for the purposes of
allocating Collections pursuant to Article IV.
(c) The Transferor may, without notice to or consent of the Investor
Certificateholders, from time to time, elect (the "Discount Option") to
increase the Discount Percentage, to reduce the Discount Percentage, to apply
the Discount Percentage to Receivables created in Accounts not previously
subject to the Discount Percentage and to eliminate the Discount Percentage in
respect of Receivables created in Accounts on and after the date of such change
or previously subject to the Discount Percentage; provided however, that the
Transferor shall not redesignate any existing Discount Option Receivables as
Principal Receivables and the Transferor shall not increase the Discount
Percentage upon or following a Pay Out Event, or if such increase would cause
the Aggregate Principal Receivables to be less than the Minimum Aggregate
Principal Receivables.
(d) The Transferor shall provide to the Servicer, the Trustee and each
Rating Agency, and the Persons, if any, specified in any Supplement with
respect to each class of Investor Certificates of any then outstanding Series
which is not assigned a rating by any Rating Agency, 30 days' prior written
notice of any designation, increase, reduction or elimination of the Discount
Percentage, and such designation, increase, reduction or elimination shall
become effective on the date specified in such notice unless such designation,
increase, reduction or elimination in the reasonable belief of the Transferor
would cause a Pay Out Event, or an event which, with notice or the lapse of
time or both, would constitute a Pay Out Event, to occur with respect to any
Series; provided, however, that if such designation would cause the Discount
Percentage to be less than 1% or more than 3%, the Rating Agency Condition
shall have been satisfied with respect to all outstanding Series that are
assigned a rating by any Rating Agency, and the Persons, if any, specified in
any Supplement with respect to each class of Investor Certificates of any
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then outstanding Series which is not assigned a rating by any Rating Agency,
shall have consented to such increase, reduction or elimination.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE RECEIVABLES
SECTION 3.1 ACCEPTANCE OF APPOINTMENT AND OTHER MATTERS RELATING TO THE
SERVICER.
(a) Proffitt's, Inc. hereby agrees to act as the Servicer under this
Agreement. The Investor Certificateholders, by their acceptance of the
Investor Certificates, consent to Proffitt's, Inc., acting as Servicer.
(b) The Servicer shall service and administer the Receivables and shall
collect payments due under the Receivables in accordance with its customary and
usual policies and procedures in effect for servicing consumer revolving credit
card accounts receivables comparable to the Receivables, as such policies and
procedures may be modified from time to time, and in accordance with the
applicable Credit Card Guidelines and shall have full power and authority,
acting alone or through any party properly designated by it hereunder, to do
any and all things in connection with such servicing and administration which
it may deem necessary or desirable. The Servicer has designated its Affiliate,
McRae's, Inc., as the initial Subservicer. Without limiting the generality of
the foregoing and subject to Section 10.1, the Servicer is hereby authorized
and empowered (i) to make withdrawals and payments and to instruct the Trustee
to make withdrawals and payments from the Collection Account, the Excess
Funding Account or any other account or accounts maintained for the benefit of
the Certificateholders or with regard to any Enhancement as set forth in this
Agreement and any Supplement, (ii) unless such power and authority is revoked
by the Trustee on account of the occurrence of a Servicer Default pursuant to
Section 10.1, to instruct the Trustee to take any action permitted or required
under any Enhancement at such time as is set forth in this Agreement or any
Supplement, (iii) to execute and deliver, on behalf of the Trust for the
benefit of the Certificateholders, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables and (iv) to make any filings,
reports, notices, applications, or registrations with, and to seek any consents
or authorizations from, the Securities and Exchange Commission and any state
securities or "blue sky" law authorities on behalf of the Trust as may be
necessary or advisable to comply with any Federal or state securities or "blue
sky" laws or reporting requirements. Prior to receipt by a Responsible Officer
of the Trustee of written notice of a Servicer Default, the Trustee shall
promptly follow the written instructions of the Servicer to withdraw funds from
the
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Collection Account and any other account or accounts maintained for the benefit
of the Certificateholders or with regard to any Enhancement. The Trustee shall
furnish the Servicer with limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder, and the Trustee shall not be held responsible
for any act or omission by the Servicer in its use of such powers of attorney.
(c) In the event that the Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this Agreement
(including by reason of the application of the provisions of Section 9.2 or the
order of any Federal governmental agency having regulatory authority over the
Transferor or any court of competent jurisdiction that the Transferor not
transfer any additional Receivables to the Trust) then, in any such event, (A)
the Servicer agrees to allocate, after such date, all Collections (including
Collections of Finance Charge Receivables) with respect to Principal
Receivables, and all amounts which would have constituted Collections
(including Collections of Finance Charge Receivables) with respect to such
Receivables which would have been Principal Receivables but for the
Transferor's inability to transfer such Receivables to the Trust (up to an
aggregate amount equal to the Aggregate Principal Receivables in the Trust as
of such date) in accordance with Section 2.5(d) and to apply such amounts as
Collections in accordance with Article IV and (B) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clause (A) above, Collections of
Principal Receivables and all amounts which would have constituted Collections
of Principal Receivables but for the Transferor's inability to transfer
Receivables to the Trust which are charged off as uncollectible in accordance
with this Agreement shall continue to be allocated in accordance with Article
IV and all amounts which would have constituted Collections of Principal
Receivables but for the Transferor's inability to transfer Receivables to the
Trust shall be deemed to be Collections of Principal Receivables for the
purpose of calculating the applicable Investor Percentage thereunder; provided,
that if the Servicer is unable pursuant to any Requirement of Law to allocate
payments on the Accounts as described above, the Servicer agrees that it shall,
in any such event, allocate, after the date that the Transferor becomes unable
to do so, payments on each Account with respect to the balance of such Account
first to the oldest Receivable in such Account and to have such payments
applied as Collections in accordance with Article IV.
(d) The Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by the Servicer in
connection with servicing other consumer revolving credit card account
receivables.
(e) The Servicer shall maintain fidelity bond or insurance coverage
against losses through wrongdoing of its officers and employees who are
involved in the servicing of Receivables covering such actions with such
insurers and in such amounts as the Servicer believes to be reasonable from
time to time.
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(f) The Servicer shall comply with and perform its obligations under the
Account Agreements and the Credit Card Guidelines except insofar as any failure
to so comply would not materially and adversely affect the rights of the Trust
or the Certificateholders hereunder or under the Certificates.
SECTION 3.2 SERVICING COMPENSATION. As compensation for its servicing
activities hereunder and reimbursement for its expenses as set forth in the
immediately following paragraph, the Servicer shall be entitled to receive a
monthly servicing fee in respect of any Monthly Period (or portion thereof)
prior to the termination of the Trust pursuant to Section 12.1 (the "Monthly
Servicing Fee"). The Monthly Servicing Fee will be payable in arrears on each
Distribution Date in an amount equal to, with respect to each Series then
outstanding, one-twelfth (1/12th) of the product of the Servicing Fee
Percentage for such Series and the sum of the allocable portion of the
Transferor Amount and the Investor Amount of such Series, each as of the last
day of the preceding Monthly Period. The share of the Servicing Fee allocable
to each Series of Investor Certificateholders with respect to any Monthly
Period (or portion thereof) shall be equal to one twelfth (1/12th) of the
product of (A) the Servicing Fee Percentage for such Series and (B) the
Investor Amount of such Series, (after subtracting from the Investor Amount the
aggregate amount of any deposits previously made into any Principal Account) on
the last date of the applicable Monthly Period (or, in the case of the first
Distribution Date, the Initial Investor Amount, unless otherwise specified in
any Supplement) (with respect to any such Series, the "Investor Monthly
Servicing Fee"), and shall be paid to the Servicer pursuant to the applicable
Supplement. The Investor Monthly Servicing Fee will be funded from collections
of Finance Charge Receivables allocable to the Investor Amount. The remainder
of the Monthly Servicing Fee shall be paid by the Transferor, and in no event
shall the Trust, the Trustee, any Enhancement Provider or the Investor
Certificateholders be liable for the share of the Monthly Servicing Fee to be
paid by the Transferor. In the case of the first Monthly Period, the Monthly
Servicing Fee and the Investor Monthly Servicing Fee shall accrue from the
Initial Closing Date.
The Servicer's expenses include the amounts due to the Trustee pursuant to
Section 11.5 and the reasonable fees and disbursements of independent
accountants and the Subservicer, if any, and all other expenses incurred by the
Servicer in connection with its activities hereunder; provided, that the
Servicer shall not be liable for any liabilities, costs or expenses of the
Trust, the Investor Certificateholders or the Certificate Owners arising under
any tax law, including without limitation any federal, state or local income or
franchise taxes or any other tax imposed on or measured by income (or any
interest or penalties with respect thereto or arising from a failure to comply
therewith), except to the extent incurred as a result of the Servicer's
violation of the provisions of this Agreement. The Servicer shall be required
to pay such expenses for its own account and shall not be entitled to any
payment therefore other than the Monthly Servicing Fee.
SECTION 3.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER.
Proffitt's, Inc., as initial Servicer, hereby makes, and any successor Servicer
by its appointment hereunder shall make, the following representations,
warranties and
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covenants with respect to any Series of Certificates, as of the date of the
related Supplement and the related Closing Date, unless otherwise stated in
such Supplement, on which the Trustee has relied in accepting the Receivables
and the other property conveyed pursuant to Section 2.1 in trust and in
authenticating the Certificates:
(a) Organization and Good Standing. The Servicer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has full power, authority and legal
right to own its properties and conduct its business as such properties are
presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this Agreement and any Supplement.
(b) Due Qualification. The Servicer is duly qualified to do business and
is in good standing (or is exempt from such requirements) in any state where
such qualification is necessary in order to service the Receivables as required
by this Agreement and any Supplement and has obtained all necessary licenses
and approvals as required under federal and state law, and if the Servicer
shall be required by any Requirement of Law to so qualify or obtain such
license or approval, then it shall do so, except where the failure to be so
qualified or to obtain such license or approval does not materially and
adversely affect the Servicer's ability to perform its obligations hereunder or
the enforceability of any Receivable.
(c) Due Authorization. The execution, delivery, and performance of this
Agreement and any Supplement and the consummation of the transactions provided
for in this Agreement and any Supplement have been duly authorized by the
Servicer by all necessary action on the part of the Servicer.
(d) Binding Obligation. Each of this Agreement and any Supplement
constitutes a legal, valid and binding obligation of the Servicer, enforceable
against the Servicer in accordance with its terms, subject to applicable
bankruptcy, insolvency, receivership, conservatorship, reorganization,
moratorium or other similar laws now or hereinafter in effect affecting the
enforcement of creditors' rights in general (or, to the extent applicable to
the Servicer, the rights of creditors of banks) and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(e) No Violation. The execution and delivery of this Agreement and any
Supplement by the Servicer, the performance by the Servicer of the transactions
contemplated by this Agreement and any Supplement and the fulfillment by the
Servicer of the terms hereof and thereof, will not conflict with, violate or
result in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under,
any Requirement of Law applicable to the Servicer or any indenture, contract,
agreement, mortgage, deed of trust or other instrument to which the Servicer is
a party or by which it is bound, where such conflict, violation, breach or
default would not have a material adverse effect.
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(f) No Proceedings. There are no proceedings or investigations pending or,
to the best knowledge of the Servicer, threatened against the Servicer before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by
this Agreement or any Supplement, seeking any determination or ruling that, in
the reasonable judgment of the Servicer, would materially and adversely affect
the performance by the Servicer of its obligations under this Agreement or any
Supplement, or seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of this Agreement or any
Supplement.
(g) Compliance with Requirements of Law. The Servicer shall duly satisfy
its obligations in all material respects on its part to be fulfilled under or
in connection with each Receivable and the corresponding Account, will maintain
in effect all material qualifications required under Requirements of Law in
order to service properly each Receivable and the corresponding Account and
will comply in all material respects with all other Requirements of Law in
connection with servicing each Receivable and the related Account, the failure
to comply with which would have a material adverse effect on the
Certificateholders (without regard to the amount of any Enhancement).
(h) No Rescission or Cancellation. Except in connection with an
Adjustment Payment Obligation pursuant to Section 3.8, the Servicer shall not
permit any rescission or cancellation of any Receivable except as ordered by a
court of competent jurisdiction or other Governmental Authority or in the
ordinary course of its business and in accordance with the applicable Credit
Card Guidelines.
(i) Protection of Certificateholders' Rights. The Servicer shall take no
action which, nor omit to take any action the omission of which, would impair
the rights of Certificateholders in any Receivable or the rights of any
Enhancement Provider, nor shall it reschedule, revise, waive or defer payments
due on any Receivable except in accordance with the applicable Credit Card
Guidelines.
(j) All Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority required to be
obtained on or prior to each date as of which this representation is being made
in connection with the execution and delivery by the Servicer of this Agreement
and any Supplement, the performance by the Servicer of the transactions
contemplated by this Agreement and any Supplement and the fulfillment by the
Servicer of the terms hereof and thereof, have been obtained; provided,
however, that no representation or warranty is made regarding state securities
or "blue sky" laws in connection with any distribution of the Certificates.
(k) Receivables Not to be Evidenced by Instruments. Except in connection
with its enforcement or collection of an Account, the Servicer will take no
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action to cause any Receivable to be evidenced by any instrument (as defined in
the UCC as in effect in the Relevant UCC State).
In the event of a breach of any of the representations and warranties set
forth in Section 3.3(g), (h), (i) or (k) with respect to a Receivable, and such
breach has a material adverse effect on the Certificateholders' interest in
such Receivable (without regard to the amount of any Enhancement) then, upon
the expiration of 90 days or any longer period agreed upon by the Trustee (not
to exceed an additional 90 days) from the earlier to occur of the discovery of
any such event by the Servicer or receipt by the Servicer of written notice of
any such event given by the Trustee, unless such breach has been cured, each
such Receivable or, at the option of the Transferor, all such Receivables with
respect to the related Account, shall be assigned and transferred to the
Servicer upon the deposit by the Servicer into the Collection Account in
immediately available funds prior to the next succeeding Distribution Date of
an amount equal to the amount of each such Receivable at the end of the Monthly
Period preceding such Distribution Date, plus the amount of finance charges at
the monthly periodic rate applicable to such Receivable from the last date
billed through the end of such Monthly Period to the extent not included in the
amount of such Receivable. Any such deposit into the Collection Account in
connection with any such assignment of a Receivable shall be considered a
payment in full of such Receivable and such deposit shall be applied in
accordance with the provisions of Article IV. Upon the assignment to the
Servicer of such a Receivable, the Trust shall, without further action, be
deemed to transfer, assign, set-over and otherwise convey to the Servicer,
without recourse, representation or warranty, all the right, title and interest
of the Trust in and to such Receivable, all monies due or to become due with
respect thereto and all proceeds thereof. The Trustee shall execute such
documents and instruments of transfer or assignment and take such other actions
as shall reasonably be requested by the Servicer to effect the conveyance of
such Receivable pursuant to this subsection. The obligation of the Servicer set
forth in this Section 3.3 shall constitute the sole remedy respecting any
breach by the Servicer of the representations and warranties set forth in the
above-referenced subsections with respect to such Receivable available to
Certificateholders or the Trustee on behalf of Certificateholders.
Notwithstanding any other provision of this Section 3.3, no assignment of a
Receivable to the Servicer pursuant to this Section 3.3 shall occur if the
Servicer fails to make the deposit required by this Section 3.3 with respect to
such Receivable.
SECTION 3.4 REPORTS AND RECORDS FOR THE TRUSTEE
(a) Initial Report. On the Closing Date with respect to each Series of the
Investor Certificates, the Servicer shall prepare and deliver, as provided in
Section 13.5, to the Trustee and the Rating Agencies, and the Persons, if any,
specified in any Supplement with respect to each class of Investor Certificates
of any then outstanding Series which is not assigned a rating by any Rating
Agency, an Officer's Certificate substantially in the form of Exhibit D setting
forth the Aggregate Principal Receivables, the Transferor Amount, the Discount
Option Receivables and the Transferor Interest Percentage as of the
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end of the day two Business Days preceding the Closing Date and the expected
Transferor Amount after giving effect to the issuance of such Series.
(b) Daily Reports. For so long as deposits of Collections are required to
be made daily by the Servicer pursuant to Section 4.1(f), on each Business Day
commencing on the Initial Closing Date, the Servicer shall prepare, maintain at
the office of the Servicer and make available for inspection by the Trustee, a
record setting forth the aggregate amount of Collections processed by the
Servicer on the second preceding Business Day. The Servicer shall prepare such
other reports on a daily (or less frequent) basis as may be required by any
Supplement.
(c) Monthly Servicer's Certificate. By 1:00 p.m., Minneapolis, Minnesota
time on each Determination Date, the Servicer shall deliver, as provided in
Section 13.5, to the Trustee, the Paying Agent and the Rating Agencies, an
Officer's Certificate signed by a Servicing Officer substantially in the form
of Exhibit E (with the Monthly Certificateholder's Statement required pursuant
to the applicable Supplement attached) setting forth the following information
(which, in the case of clauses (iii), (iv) and (v) below, will be stated on the
basis of an original principal amount of $1,000 per Certificate): (i) the
aggregate amount of Collections processed for the immediately preceding Monthly
Period and the aggregate amount of Collections of Finance Charge Receivables
and the aggregate amount of Collections of Principal Receivables processed
during such Monthly Period; (ii) the Investor Percentage with respect to each
Series of Certificates with respect to Collections of Principal Receivables,
Finance Charge Receivables and Defaulted Receivables processed during the
immediately preceding Monthly Period; (iii) for each Series and for each class
within any such Series, the amount of such distribution allocable to principal,
if applicable; (iv) for each Series and for each class within any such Series,
the amount of such distribution allocable to interest, if applicable; (v) the
aggregate outstanding balance of the Accounts which were delinquent by 31 to 60
days, 61 to 90 days and 91 days or more as of the close of business on the last
day of the immediately preceding Monthly Period immediately preceding such
Distribution Date; (vi) for each Series and for each class within any such
Series, the Investor Default Amount for the immediately preceding Monthly
Period; (vii) for each Series and for each class within any such Series, the
amount of the Investor Charge Offs and the amount of the reimbursements thereof
for the next succeeding Distribution Date; (viii) for each Series, the Monthly
Servicing Fee for the next succeeding Distribution Date; (ix) for each Series,
the existing deficit controlled amortization amount or deficit controlled
accumulation amount, if applicable; (x) the aggregate amount of Receivables in
the Trust at the close of business on the last day of the Monthly Period
immediately preceding such Distribution Date; (xi) for each Series, the
Investor Amount at the close of business on the last day of the Monthly Period
immediately preceding such Distribution Date; (xii) the available amount of
Enhancement, if any, for each Series; and (xiii) whether a Pay Out Event with
respect to any Series shall have occurred during or with respect to the
immediately preceding Monthly Period. The Trustee shall make such statement
available to the Certificateholders, but shall be under no duty to recalculate,
verify or recompute the information supplied to it under this Section 3.4.
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SECTION 3.5 ANNUAL SERVICER'S CERTIFICATE. The Servicer will deliver, as
provided in Section 13.5, to the Trustee, the Rating Agencies and the Persons,
if any, specified in the Supplement with respect to each class of Investor
Certificates of any then outstanding Series which is not assigned a rating by
any Rating Agency, on or before June 30 of each calendar year, beginning with
1998, an Officer's Certificate substantially in the form of Exhibit F (a)
stating that a review of the activities of the Servicer during the preceding
Fiscal Year (or, in the case of the first such certificate, during the period
from the Initial Closing Date until February 3, 1998) and of its performance
under this Agreement was made under the supervision of the officer signing such
certificate and (b) stating that to the best of such officer's Knowledge, based
on such review, either there has occurred no event which, with the giving of
notice or passage of time or both, would constitute a Servicer Default and the
Servicer has fully performed all its obligations under this Agreement
throughout such year, or, if there has occurred such an event, specifying each
such event known to such officer and the nature and status thereof. A copy of
such Officer's Certificate may be obtained by any Investor Certificateholder by
a request in writing to the Trustee directed to the Trustee's address specified
in Section 13.5 hereof.
SECTION 3.6 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
(a) On or before June 30 of each calendar year, beginning with 1998, the
Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as specified in Section 13.5, a report prepared in
accordance with standards established by the American Institute of Certified
Public Accountants and, accordingly, including such procedures or examination
as they considered necessary in the circumstances, to the Trustee, the Rating
Agencies and the Persons, if any, specified in any Supplement with respect to
each class of Investor Certificates of any then outstanding Series which is not
assigned a rating by any Rating Agency, and, as may be required by any Series
Supplement, any Enhancement Provider to the effect that, such firm has applied
certain procedures to certain documents and records relating to the servicing
of the Accounts, compared the information contained in the Servicer's
certificates issued during the period covered by the report with such documents
and records and that, based upon such procedures or examination, no matters
came to the attention of such accountants that caused them to believe that such
servicing was not conducted in all material respects, in conformity with
Section 3.4(c), except for such exceptions as such accountants believe to be
immaterial and such other exceptions as shall be set forth in such report. Such
procedures or examination will include comparisons of the mathematical
calculations contained in the Monthly Servicer's Certificates forwarded by the
Servicer pursuant to Section 3.4(c) during the period covered by such report
with the Servicer's computer reports that were the source of such amounts, and
such report shall state that, on the basis of such comparison, such accountants
are of the opinion that such amounts are consistent, except for such exceptions
as they believe to be immaterial and such other exceptions as shall be set
forth in such report. In the event such firm requires the Trustee to agree to
the procedures performed by such firm, the Servicer
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shall direct the Trustee in writing to so agree; it being understood and agreed
that the Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Trustee makes no independent
inquiry or investigation as to, and shall have no obligation or liability in
respect of, the sufficiency, validity or correctness of such procedures. A copy
of such report may be obtained by any Investor Certificateholder by a request
in writing to the Trustee directed to the Trustee's address specified in
Section 13.5 hereof.
(b) On or before June 30 of each calendar year, beginning with 1998, the
Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as specified in Section 13.5, a report to the Trustee,
the Rating Agencies and the Persons, if any, specified in any Supplement with
respect to each class of Investor Certificates of any then outstanding Series
which is not assigned a rating by any Rating Agency, and, as may be required by
any Series Supplement, any Enhancement Provider, to the effect that in
connection with their examination of the Monthly Servicer's Certificates,
nothing came to their attention that caused them to believe that the Servicer
failed to comply with provisions of Sections 3.2, 3.4(c), 4.1 and 8.8 of this
Agreement. In the event such firm requires the Trustee to agree to the
procedures performed by such firm, the Servicer shall direct the Trustee in
writing to so agree; it being understood and agreed that the Trustee will
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and the Trustee makes no independent inquiry or investigation as
to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
SECTION 3.7 TAX TREATMENT. The Transferor has structured this Agreement
and the Investor Certificates (other than any Investor Certificates held by the
Transferor) with the intention that such Investor Certificates will qualify
under applicable federal income tax law as indebtedness of the Transferor or,
if specified in the applicable Supplement, an interest in a partnership, and
the Transferor, any entity acquiring any direct or indirect interest in the
Exchangeable Transferor Certificate, each Investor Certificateholder (or
Certificate Owner) by acceptance of its Certificate (or, in the case of a
Certificate Owner, by virtue of such Certificate Owner's acquisition of a
beneficial interest therein) and each holder of an interest in any Enhancement
Investor Amount by its acceptance thereof agrees, and shall be deemed to agree,
to treat such Investor Certificates (or beneficial interest therein) or
Enhancement Investor Amount for purposes of Federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as
indebtedness, or, if specified in the applicable Supplement, an interest in a
partnership. Each Certificateholder agrees that it will cause any Certificate
Owner acquiring an interest in a Certificate through it to comply with this
Agreement as to treatment as indebtedness or, if specified in the applicable
Supplement, an interest in a partnership, for certain tax purposes. Consistent
with the foregoing, the Trustee shall not file a Federal income tax return on
behalf of the Trust or apply for a taxpayer identification number on behalf of
the Trust unless required to do so as a result of a determination by the
Internal Revenue Service or pursuant to the terms of a Supplement.
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SECTION 3.8 ADJUSTMENTS.
(a) If the Servicer adjusts downward the amount of any Principal
Receivable because of a rebate, refund, unauthorized charge or billing error to
an Obligor, or because such Receivable was created in respect of merchandise or
services which were refused, returned or not received by an Obligor, or if the
Servicer otherwise adjusts downward the amount of any Principal Receivable
without receiving Collections therefor or without charging off such amount as
uncollectible, then, in any such case, the Servicer shall deduct from the
Aggregate Principal Receivables and decrease the Transferor Amount by the
amount of such adjustment. Similarly, the amount of the Aggregate Principal
Receivables and the Transferor Amount will be reduced by the amount of any
Principal Receivable which was discovered as having been created through a
fraudulent or counterfeit charge or with respect to which the covenant
contained in Section 2.5(b) was breached. Any adjustment ("Adjustment Payment
Obligation"), required pursuant to either of the two preceding sentences shall
be made on or prior to the end of the Monthly Period in which such adjustment
obligation arises. In the event that, following any such reduction, the
Transferor Amount would be less than the Minimum Transferor Amount, the
Transferor shall immediately pay to the Servicer for deposit into the Excess
Funding Account, in immediately available funds, an amount equal to the amount
by which the Transferor Amount would be reduced below the Minimum Transfer
Amount. In the event that the Servicer adjusts upwards the principal amount of
any Receivable, the Aggregate Principal Receivables and the Transferor Amount
shall be increased by the amount of such upward adjustment, and any unpaid
Adjustment Payment Obligation shall be reduced by the applicable amount.
(b) If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of a Receivable and such Collection was received by the
Servicer in the form of a check which is not honored for any reason or (ii) the
Servicer makes a mistake with respect to the amount of any Collection and
deposits an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently
deposited into the Collection Account to reflect such dishonored check or
mistake. Any Receivable in respect of which a dishonored check is received
shall be deemed not to have been paid. Notwithstanding the first two sentences
of this paragraph, no adjustments shall be made pursuant to this paragraph that
will change any amount of Collections previously reported pursuant to Section
3.4(c).
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
SECTION 4.1 ESTABLISHMENT OF COLLECTION ACCOUNT AND ALLOCATIONS WITH
RESPECT TO THE EXCHANGEABLE TRANSFEROR CERTIFICATE.
(a) The Collection Account. The Servicer shall establish and maintain or
cause to be established and maintained in the name of the Trustee, on behalf of
the Trust, with the Trustee or another Qualified Institution a segregated
corporate trust account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Investor Certificateholders. The Trustee shall possess all right, title and
interest in all amounts held from time to time in the Collection Account and in
all proceeds thereof. The Collection Account shall be under the sole dominion
and control of the Trustee for the benefit of the Investor Certificates. If, at
any time, the institution holding the Collection Account ceases to be a
Qualified Institution, the Trustee (or the Servicer on its behalf of the
Trustee) shall within five (5) Business Days of a Responsible Officer of the
Trustee receiving written notice or having actual knowledge of such event
establish a new Collection Account meeting the conditions specified above with
a Qualified Institution and shall transfer any cash and/or any investments to
such new Collection Account, and from the date such new Collection Account is
established, it shall be the "Collection Account." The foregoing
notwithstanding, pursuant to the authority granted to the Servicer in Section
3.1(b), the Servicer shall have the power, revocable by the Trustee, to make
withdrawals and payments from the Collection Account and to instruct the
Trustee to make withdrawals and payments from the Collection Account for the
purposes of carrying out the Servicer's or the Trustee's duties hereunder.
(b) Interest in the Trust. Each Series shall represent interests in the
Trust, including the benefits of Enhancement, if any, to be provided with
respect to such Series as indicated in the Supplement relating to such Series
and the right to receive Collections and other amounts at the times and in the
amounts specified in this Article IV to be deposited in the Collection Account
and any other accounts maintained for the benefit of the Certificates or to be
paid to the Investor Certificateholders of such Series. The Exchangeable
Transferor Certificate shall represent the interest in the Trust not
represented by any Series then outstanding, including the right to receive
Collections and other amounts at the times and in the amounts specified in this
Article IV to be paid to the Transferor (the "Transferor Interest"); provided,
however, that the Exchangeable Transferor Certificate shall not represent any
interest in the Collection Account or any other accounts maintained for the
benefit of the Certificateholders or the benefits of Enhancement, if any, to be
provided by an Enhancement Provider issued with respect to any Series, except
as specifically provided in this Article IV.
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(c) Administration of the Collection Account. At the written direction of
the Servicer, funds held in the Collection Account to be invested shall be
invested by the Trustee in Permitted Investments selected by the Servicer. All
such Permitted Investments shall be held by the Trustee for the benefit of the
Investor Certificateholders. Investments of funds representing Collections
collected during any Monthly Period shall be invested in Permitted Investments
that will mature so that such funds will be available by the close of business
on the Business Day preceding the Distribution Date next succeeding such
Monthly Period. Any funds held in the Collection Account to be so invested
shall be invested solely in Permitted Investments. All Permitted Investments
shall be held to maturity. The Trustee shall maintain possession of the
negotiable instruments or securities, if any, evidencing such Permitted
Investments. For purposes of determining the availability of funds or balances
in the Collection Account, all investment earnings on such funds shall be
deemed not to be available or on deposit until actually credited to such
account. On each Distribution Date, all interest and other investment earnings
(net of losses and investment expenses) on funds held in the Collection Account
shall be paid to the Holder of the Exchangeable Transferor Certificate. The
Transferor at its option may direct the Servicer's investment of funds pursuant
to this Section 4.1(c).
(d) Allocations For the Exchangeable Transferor Certificate. Throughout
the existence of the Trust, the Servicer shall allocate to the Holder of the
Exchangeable Transferor Certificate an amount equal to the product of (A) the
Transferor Percentage and (B) the aggregate amount of Collections allocated to
Principal Receivables and Finance Charge Receivables, respectively, in respect
of each Monthly Period. Notwithstanding anything to the contrary in Section
4.1, unless specified in any Supplement, the Servicer need not deposit this
amount, or any other amounts so allocated to the Exchangeable Transferor
Certificate pursuant to any Supplement, into the Collection Account and shall
pay such amounts as collected to the Holder of the Exchangeable Transferor
Certificate.
(e) Allocation of Collections Between Collections of Principal Receivables
and Collections of Finance Charge Receivables. Collections of Receivables
(other than Recoveries) for any day during a Monthly Period shall be allocated
first to Finance Charge Receivables in an amount equal to the sum of (i) the
amount of Finance Charge Receivables billed during the prior Monthly Period and
(ii) the amount of Finance Charge Receivables for prior Monthly Periods which
were not covered by Collections on Receivables (other than Recoveries)
allocated to Receivables for such Monthly Periods. The balance of Collections
of Receivables for such day shall be allocated to Principal Receivables. If the
Servicer shall at any time be able to determine the actual amount of
Collections processed on any day which are Collections of Finance Charge
Receivables, Collections of Principal Receivables and Recoveries, the Servicer,
upon ten (10) days notice to the Trustee, the Transferor (if the Servicer is
not then the Transferor) and each Rating Agency, may at its option henceforth
allocate Collections received on each day in accordance with the actual amount
of Collections of Finance Charge Receivables (other than Recoveries),
Collections of Principal Receivables and Recoveries collected on such day.
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(f) Collections. The Servicer will apply all Collections with respect to
the Receivables for each Monthly Period as described in this Article IV and
each Supplement. Except as otherwise provided herein or in the applicable
Supplement, the Servicer shall deposit Collections into the Collection Account
no later than the second Business Day following the Date of Processing of such
Collections. Subject to the express terms of any Supplement, but
notwithstanding anything else in this Agreement to the contrary, for so long
as, and only so long as, the Company or an Affiliate of the Company shall be
the Servicer hereunder and no Pay Out Event relating to a Servicer Default
shall have occurred and be continuing, and either (i) the Company or such
Affiliate shall maintain a short-term debt or certificate of deposit rating
(which may be an implied rating) of P-1 by Moody's and of A-1+ by Standard &
Poor's, or (ii) Proffitt's, Inc. shall have obtained a written notification
from each Rating Agency to the effect that such Rating Agency does not intend
to downgrade or withdraw its then current rating of any outstanding Series of
Investor Certificates despite the Servicer's inability to satisfy the rating
requirement specified in clause (i), and for two Business Days following any
reduction of either such rating or failure to satisfy the conditions of clause
(ii), the Servicer need not deposit Collections into the Collection Account or
make payments to the holder of the Exchangeable Transferor Certificate prior to
the close of business on the second Business Day following the Date of
Processing, but rather may make a single deposit in the Collection Account in
immediately available funds on the Business Day prior to each Distribution Date
in an amount equal to the Collections with respect to the Monthly Period
preceding such Distribution Date to the extent such amounts and Collections are
allocated to one or more Series in accordance with Article IV. Collections
shall not be required to be invested in Permitted Investments until such time
as they are deposited into the Collection Account. The Servicer shall promptly
notify the Trustee of any downgrade or withdrawal of its short-term credit or
certificate of deposit rating or, if an Affiliate of Proffitt's, Inc. is acting
as Servicer hereunder, of any such downgrade or withdrawal of any such rating
of such Affiliate.
Should the Servicer be required to make daily deposits of Collections into
the Collection Account pursuant to this subsection, during any Amortization
Period, the Servicer may, subject to the provisions of the applicable
Supplement, cease depositing Collections of Principal Receivables received in
any Monthly Period and allocable to a Series at such time as the amount of
Collections of Principal Receivables allocable to such Series and deposited
into the Collection Account equals the amount of principal scheduled or
permitted to be paid on the next succeeding Distribution Date with respect to
such Series. Collections of Principal Receivables allocable to such Series in
excess of such amount shall be distributed, on a daily basis as they are
collected, to the Transferor.
(g) Excess Funding Account. The Servicer, for the benefit of the
Certificateholders, shall establish and maintain or cause to be established and
maintained in the name of the Trustee, on behalf of the Trust, with a Qualified
Institution a segregated trust account, which may be a subaccount of the
Collection Account, bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of
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the Investor Certificateholders (the "Excess Funding Account"). The Trustee
shall possess all right, title and interest in all funds on deposit from time
to time in the Excess Funding Account and in all proceeds thereof. The Excess
Funding Account shall be under the sole dominion and control of the Trustee for
the benefit of the Investor Certificateholder. If, at any time, the institution
holding the Excess Funding Account is not the Trustee, or if another Person,
such institution ceases to be a Qualified Institution, the Trustee (or the
Servicer on its behalf) shall within five (5) Business Days of a Responsible
Officer of the Trustee receiving written notice or having actual knowledge of
such event establish a new Excess Funding Account meeting the conditions
specified above with a Qualified Institution and shall transfer any cash and/or
any investments to such new Excess Funding Account, and from the date such new
Excess Funding Account is established, it shall be the "Excess Funding
Account." The foregoing notwithstanding, pursuant to the authority granted to
the Servicer in Section 3.1(b), the Servicer shall have the power, revocable by
the Trustee, to make withdrawals and payments from the Excess Funding Account
and to instruct the Trustee to make withdrawals and payments from the Excess
Funding Account for the purposes of carrying out the Servicer's or the
Trustee's duties hereunder.
At the written direction of the Servicer, funds held in the Excess Funding
Account to be invested shall be invested by the Trustee in Permitted
Investments selected by the Servicer. All such Permitted Investments shall be
held by the Trustee for the benefit of the Investor Certificateholders. The
Trustee shall maintain for the benefit of the Investor Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. Funds held in the Excess Funding Account on any date
(after giving effect to any withdrawals from the Excess Funding Account on such
date) will be invested in Permitted Investments that will mature so that funds
will be available at the close of business on the next Business Day following
such date. On each Determination Date, the Servicer shall instruct the Trustee
to withdraw on the next succeeding Distribution Date from the Excess Funding
Account and deposit in the Collection Account all interest and other investment
earnings (net of losses and investment expenses) on funds held in the Excess
Funding Account, for application as Collections of Finance Charge Receivables
with respect to the prior Monthly Period. Interest (including reinvested
interest) and other investment income and earnings on funds held in the Excess
Funding Account shall not be considered part of the Excess Funding Amount for
purposes of this Agreement. On each Business Day (other than following a Pay
Out Event), the Servicer shall determine the amount by which the Transferor
Amount exceeds the Minimum Transferor Amount on such date and shall instruct
the Trustee to withdraw such amount from the Excess Funding Account on such
date and pay such amount to the holder of the Exchangeable Transferor
Certificate. On each Determination Date on which one or more Series is in an
Amortization Period, the Servicer shall determine the aggregate amount of
Principal Shortfalls, if any, with respect to each such Series that is a
Principal Sharing Series (after giving effect to the allocation and payment
provisions in the Supplement with respect to each such Series on the next
succeeding Distribution Date), and the Servicer shall instruct the Trustee to
withdraw such amount (up to the Excess Funding Amount) from the Excess Funding
Account on the next succeeding Distribution
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Date and allocate such amount among each such Series as Shared Principal
Collections as specified in each related Supplement to the extent needed to
cover the principal payments due to or for the benefit of such Series.
(h) Principal and Shared Principal Collections. Collections of Principal
Receivables and certain other amounts for any Monthly Period allocated to any
Series in a Group will be used first to cover certain amounts described in the
related Series Supplements (including any required deposits into a Principal
Account or required distributions to Certificateholders of such Series). For
each Distribution Date, the Servicer will determine the amount of collections
of Principal Receivables for any Monthly Period (plus certain other amounts
required by the related Series Supplement) allocated to such Series remaining
after covering such required deposits and distributions and any similar amount
remaining for any other Series in such Group (collectively, "Shared Principal
Collections"), and will allocate the Shared Principal Collections to cover any
principal distributions to Certificateholders and deposits to Principal
Accounts for any Series in such Group which are either scheduled or permitted
and which have not been covered out of collections of Principal Receivables and
certain other amounts for such Series, provided that the Series Supplement for
such Series so provides ("Principal Shortfalls"). If Principal Shortfalls
exceed Shared Principal Collections for any Monthly Period, Shared Principal
Collections will be allocated pro rata among the Series in a Group entitled to
the benefits thereof based on the respective Principal Shortfalls of such
Series. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will be distributed to the holder of the Exchangeable
Transferor Certificate; provided, however, that (i) such Shared Principal
Collections will be distributed to the holder of the Exchangeable Transferor
Certificate only to the extent the Transferor Amount is greater than the
Minimum Transferor Amount and (ii) in certain circumstances provided in the
applicable Supplement, such Shared Principal Collections will be deposited in
the Excess Funding Account. Any such reallocation of collections of Principal
Receivables and other amounts will not result in a reduction in the Investor
Amount of the Series to which such collections were initially allocated.
(i) Shared Excess Finance Charge Collection. Collections of Finance Charge
Receivables and certain other amounts allocable to any Series which is included
in such Group in excess of the amounts necessary to make required payments with
respect to such Series that are payable out of collections of Finance Charge
Receivables ("Shared Excess Finance Charge Collections") will be applied to
cover any shortfalls with respect to amounts payable from collections of
Finance Charge Receivables allocable to any other Series included in such
Group, pro rata based upon the amount of the shortfall, if any, with respect to
each other Series in such Group, provided, however, that the sharing of Shared
Excess Finance Charge Collections among Series in a Group will continue only
until such time, if any, at which the Transferor shall deliver to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Transferor or its counsel, the continued sharing of Shared Excess
Finance Charge Collections among Series in any Group would have adverse
regulatory implications with respect to the Transferor. Following the delivery
by the Transferor of any such certificate to the Trustee there will
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not be any further sharing of Shared Excess Finance Charge Collections among
the Series in a Group. In all cases, any Shared Excess Finance Charge
Collections remaining after covering shortfalls with respect to all outstanding
Series in a Group will be paid to the holder of the Exchangeable Transferor
Certificate.
On each Distribution Date, (i) the Servicer shall allocate Shared Excess
Finance Charge Collections with respect to the Series in a Group to each Series
in such Group, pro rata, in proportion to the Finance Charge Shortfalls, if
any, with respect to each such Series and (ii) the Servicer shall withdraw (or
shall instruct the Trustee to withdraw) from the Collection Account and pay to
the holder of the Exchangeable Transferor Certificate an amount equal to the
excess, if any, of (x) the aggregate amount of Shared Excess Finance Charge
Collections for all such Series for such Distribution Date over (y) the
aggregate amount of Finance Charge Shortfalls for all such Series for such
Distribution Date.
(j) Net Deposits. For so long as Proffitt's, Inc. or an Affiliate of
Proffitt's, Inc. shall be the Servicer hereunder and a Servicer Default shall
not have occurred and be continuing, the Servicer may make deposits into the
Collection Account or the Excess Funding Account on any date net of amounts
payable as of such date to the Transferor or the Servicer from amounts held in
the Collection Account or the Excess Funding Account, it being understood that
the Investor Monthly Servicing Fee with respect to any Series shall be payable
to the Servicer only in accordance with the provisions specified in the related
Supplement and that the foregoing shall in no event increase the amount payable
to the Transferor or the Servicer hereunder or pursuant to any Supplement.
[THE REMAINDER OF ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE V
[ARTICLE V IS RESERVED AND MAY BE SPECIFIED
IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES]
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 THE CERTIFICATES. Subject to Sections 6.10 and 6.11, the
Investor Certificates of each Series and any class thereof may be issued in
bearer form (the "Bearer Certificates") with attached interest coupons and a
special coupon (collectively, the "Coupons") or in fully registered form (the
"Registered Certificates"), and shall be
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substantially in the form of the exhibits with respect thereto attached to the
applicable Supplement. The Exchangeable Transferor Certificate shall be
substantially in the form of Exhibit A. The Investor Certificates and the
Exchangeable Transferor Certificate shall, upon issue pursuant hereto or to
Section 6.9 or Section 6.11, be executed and delivered by the Transferor (or
the Trustee on behalf of the Trust, if specified in the applicable Supplement)
to the Trustee for authentication and redelivery as provided in Section 6.2.
Any Investor Certificates shall be issued in minimum denominations of $1,000
and in integral multiples of $1,000 in excess thereof, unless otherwise
specified in any Supplement. If specified in the related Supplement for any
Series, the Investor Certificates shall be issued upon initial issuance as a
single certificate in an original principal amount equal to the Initial
Investor Amount as described in Section 6.10. The Exchangeable Transferor
Certificate may also be issued in two or more certificates. Each Certificate
executed by the Transferor shall be executed by manual or facsimile signature
on behalf of the Transferor by its President, any Executive Vice President,
Senior Vice President or the Treasurer. Certificates bearing the manual or
facsimile signature of the individual who was, at the time when such signature
was affixed, authorized to sign on behalf of the Transferor or the Trustee
shall not be rendered invalid, notwithstanding that such individual has ceased
to be so authorized prior to the authentication and delivery of such
Certificates or does not hold such office at the date of such Certificates. No
Certificate shall be entitled to any benefit under this Agreement or any
applicable Supplement, or be valid for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by or on behalf of the Trustee by the manual
signature of a Responsible Officer, and such certificate of authentication upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication, except Bearer
Certificates which shall be dated the Issuance Date.
SECTION 6.2 AUTHENTICATION OF CERTIFICATES. Contemporaneously with the
assignment and transfer of the Receivables and the other property to the Trust,
the Trustee shall authenticate and deliver the initial Series of Investor
Certificates upon the order of the Transferor, to the Persons designated in the
related Supplement. The Trustee shall authenticate and deliver the Exchangeable
Transferor Certificate to the Transferor simultaneously with its delivery of
the initial Series of Investor Certificates. Upon an Exchange as provided in
Section 6.9 of the Agreement and the satisfaction of the conditions specified
therein, the Trustee shall authenticate and deliver the Investor Certificates
of additional Series (with the designation provided in the applicable
Supplement), upon the order of the Transferor, to the Persons designated in
such Supplement. Upon the order of the Transferor, the Certificates of any
Series shall be duly authenticated by or on behalf of the Trustee, in
authorized denominations equal to (in the aggregate) the Initial Investor
Amount of such Series of Investor Certificates. If specified in the related
Supplement for any Series, the Trustee shall authenticate and deliver outside
the United States the Global Certificate that is issued upon original issuance
thereof, upon the written order of the Transferor, to the Common Depositary as
provided in Section 6.10 against payment of the purchase price therefor. If
specified in the related Supplement
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for any Series, the Trustee shall authenticate Book-Entry Certificates that are
issued upon original issuance thereof, upon the written order of the
Transferor, to a Clearing Agency or its nominee as provided in Section 6.11
against payment of the purchase price therefor.
SECTION 6.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (which initially shall be the
Trustee) (the "Transfer Agent and Registrar") in accordance with the provisions
of Section 6.3(c) a register (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, the Transfer Agent and
Registrar shall provide for the registration of the Registered Certificates and
of transfers and exchanges of the Registered Certificates as herein provided.
The Trustee is hereby initially appointed Transfer Agent and Registrar for the
purpose of registering the Registered Certificates and transfers and exchanges
of the Registered Certificates as herein provided. The Trustee shall be
permitted to resign as Transfer Agent and Registrar upon 30 days' prior
written notice to the Transferor and the Servicer, provided, however, that such
resignation shall not be effective and the Trustee shall continue to perform
the duties of Transfer Agent and Registrar until the Transferor has appointed a
successor Transfer Agent and Registrar acceptable to the Transferor and the
Trustee. If specified in the related Supplement for any Series of
Certificates, the Transferor shall appoint any co-transfer agent and
co-registrar chosen by the Transferor, and acceptable to the Trustee,
including, if and so long as the Registered Certificates are listed on the
Luxembourg Stock Exchange or other stock exchange and such exchange shall so
require, a co-transfer agent and co-registrar in Luxembourg or the location
required by such other stock exchange. If specified in such related
Supplement, so long as the Registered Certificates relating to such Supplement
are outstanding, the Transferor shall maintain a co-transfer agent and
co-registrar in New York City or any other city designated in such Supplement
and any reference in this Agreement to the Transfer Agent and Registrar shall
include any co-transfer agent and co-registrar unless the context requires
otherwise.
Upon surrender for registration of transfer of any Registered Certificate
at any office or agency of the Transfer Agent and Registrar maintained for such
purpose, the Transferor (or the Trustee on behalf of the Trust, if specified in
the applicable Supplement) shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee, one or more new
Registered Certificates in authorized denominations of the same Series
representing like aggregate Undivided Interests in the Trust; provided,
however, that the provisions of this paragraph shall not apply to Bearer
Certificates.
At the option of any Holder thereof, Registered Certificates may be
exchanged for other Registered Certificates of the same class and Series in
authorized denominations of like aggregate Undivided Interests in the Trust,
upon surrender of the Registered Certificates to be exchanged at any office or
agency of the Transfer Agent and Registrar maintained for such purpose. At the
option of any Holder thereof, subject to
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applicable laws and regulations, Bearer Certificates may be exchanged for other
Bearer Certificates or Registered Certificates of the same class and Series in
authorized denominations of like aggregate Undivided Interests in the Trust,
upon surrender of the Bearer Certificates to be exchanged at an office or
agency of the Transfer Agent and Registrar located outside the United States.
Each Bearer Certificate surrendered pursuant to this Section 6.3 shall have
attached thereto all unmatured Coupons, provided that any Bearer Certificate so
surrendered after the close of business on the Record Date preceding the
relevant Distribution Date after the related Series Termination Date need not
have attached the Coupon relating to such Distribution Date. No Registered
Certificates may be exchanged for a Bearer Certificate.
The preceding provisions of this Section 6.3(a) notwithstanding, the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not be
required to register the transfer or exchange of any Certificate of any Series
for a period of 15 days preceding the due date for any payment with respect to
the Certificates of such Series.
Whenever any Investor Certificates of any Series are surrendered for
exchange, the Transferor (or the Trustee on behalf of the Trust, if specified
in the applicable Supplement) shall execute, and the Trustee shall authenticate
and the Transfer Agent and Registrar shall deliver (in the case of Bearer
Certificates, outside the United States), the Investor Certificates of such
Series which the Certificateholder making the exchange is entitled to receive.
Every Investor Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in a form satisfactory to the Trustee and the Transfer Agent and Registrar duly
executed by the Certificateholder thereof or his attorney duly authorized in
writing.
Except as provided in any Supplement, no service charge shall be made for
any registration of transfer or exchange of Investor Certificates, but the
Transfer Agent and Registrar and the Trustee or any co-transfer agent and
co-registrar or co-trustee may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer
or exchange of Investor Certificates.
All Investor Certificates (together with any Coupons attached to Bearer
Certificates) surrendered for registration of transfer or exchange shall be
canceled by the Transfer Agent and Registrar and disposed of in a manner
satisfactory to the Trustee and the Transferor. The Trustee shall cancel and
mutilate the Global Certificate upon its exchange in full for Definitive
Certificates and shall deliver such canceled and mutilated Global Certificate
to the Transferor. The Trustee shall also forward to the Transferor a copy of
each certificate of each Foreign Clearing Agency to the effect referred to in
Section 6.10 which was received by the Trustee with respect to each portion of
the Global Certificate exchanged for Definitive Certificates.
The Transferor shall execute and deliver to the Trustee or the Transfer
Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such
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amounts and at such times as are necessary to enable the Trustee to fulfill its
responsibilities under this Agreement and the Certificates.
(b) Except as provided in Sections 6.9 and 7.2 or in any Supplement, the
Transferor's interest in the Exchangeable Transferor Certificate and other
amounts payable to the Transferor pursuant to this Agreement shall not be sold,
transferred, assigned, exchanged, pledged, participated or otherwise conveyed,
unless (i) the Servicer has delivered to the Trustee an Officer's Certificate
stating that such sale, transfer, assignment, exchange, pledge, participation
or conveyance will not, while any Series of Certificates remains outstanding,
reduce the Transferor's retained interest in the Exchangeable Transferor
Certificate below the Minimum Transferor Interest Percentage and (ii) prior to
such sale, transfer, assignment, exchange, pledge, participation or conveyance,
the Rating Agency Condition is satisfied and (iii) the Trustee receives prior
thereto an Opinion of Counsel to the effect that (x) the conveyed interest in
the Exchangeable Transferor Certificate will be treated as either debt or an
interest in a partnership for Federal income tax purposes and that the
conveyance of such interest will not cause the Trust to be characterized for
Federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the Federal or applicable state
income taxation of any outstanding Series of Investor Certificates or any
Certificate Owner and (y) such transfer will not cause a taxable event for
Federal income tax purposes to any Investor Certificateholder.
(c) The Transfer Agent and Registrar will maintain at its expense in the
Borough of Manhattan, the City of New York (and, if specified in the related
Supplement for any Series, Luxembourg (or subject to Section 6.3(a) any other
city designated in such Supplement)), an office or offices or agency or
agencies where Investor Certificates may be surrendered for registration of
transfer or exchange (except that Bearer Certificates may not be surrendered
for exchange at any such office or agency in the United States).
(d) Unless otherwise provided in any related Supplement, registration of
transfer of Registered Certificates containing a legend relating to the
restrictions on transfer of such Registered Certificates (which legend shall be
set forth in the Supplement relating to such Investor Certificates) shall be
effected only if:
(i) (a) the sale is of at least U.S. $500,000 principal
amount of such Certificates and (b) a letter from the purchaser
satisfactory to counsel to the Servicer is executed and received;
or
(ii)(a) the Registered Certificates are transferred in
compliance with Rule 144 (or any amendment thereto) or Rule 144A
(or any amendment thereto) under the 1933 Act, and (b) a letter
from the purchaser satisfactory to counsel to the Servicer is
executed and received; or
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(iii) the Registered Certificates are sold or otherwise
transferred in any other transaction that does not require
registration under the 1933 Act, and, if the Transferor, the
Servicer, the Trustee or the Transfer Agent and Registrar so
request, an Opinion of Counsel satisfactory to it or them, in form
and substance satisfactory to it or them, is furnished to such
effect.
Registered Certificates issued upon registration of transfer of, or
Registered Certificates issued in exchange for, Registered Certificates bearing
the legend referred to above shall also bear such legend unless the Transferor,
the Servicer, the Trustee and the Transfer Agent and Registrar receive an
Opinion of Counsel satisfactory to each of them, to the effect that such legend
may be removed.
Whenever a Registered Certificate containing the legend set forth in the
related Supplement is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall promptly seek
written instructions from the Servicer regarding such transfer. The Transfer
Agent and Registrar and the Trustee shall be entitled to receive written
instructions signed by a Servicing Officer prior to registering any such
transfer or authenticating new Registered Certificates, as the case may be.
The Servicer hereby agrees to indemnify the Transfer Agent and Registrar and
the Trustee and to hold each of them harmless against any loss, liability or
expense incurred on their part and arising out of or in connection with actions
taken or omitted by them in good faith and in the exercise of ordinary care in
reliance on and in accordance with any such written instructions furnished
pursuant to this Section 6.3(d).
SECTION 6.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (a) any
mutilated Certificate (together, in the case of Bearer Certificates, with all
unmatured Coupons, if any, appertaining thereto) is surrendered to the Transfer
Agent and Registrar, or the Transfer Agent and Registrar receives evidence to
its satisfaction of the destruction, loss or theft of any Certificate and (b)
there is delivered to the Transfer Agent and Registrar, the Trustee and the
Transferor such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Transferor (or the
Trustee on behalf of the Trust, if specified in the applicable Supplement)
shall execute and the Trustee shall authenticate and the Transfer Agent and
Registrar shall deliver (in the case of Bearer Certificates, outside the United
States), in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and aggregate Undivided
Interest, if applicable. In connection with the issuance of any new
Certificate under this Section 6.4, the Trustee or the Transfer Agent and
Registrar may require the payment by the Certificateholder of a sum sufficient
to cover any tax or governmental charges (including those incurred by the
Trustee or the Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 6.4 shall constitute
complete and indefeasible evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
and presented at any time.
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SECTION 6.5 PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate (other than a Bearer Certificate) for registration of transfer, the
Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent or
representative of any of them may treat the person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Article IV and for all other purposes
whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar nor any agent or representative of any of them shall be affected by
any notice to the contrary. In the case of a Bearer Certificate, the Trustee,
the Paying Agent, the Transfer Agent and Registrar and any agent or
representative of any of them may treat the bearer of a Bearer Certificate or
Coupon as the owner of such Bearer Certificate or Coupon for the purpose of
receiving distributions pursuant to Article IV and for all other purposes
whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and
Registrar nor any agent or representative of any of them shall be affected by
any notice to the contrary. Notwithstanding the foregoing provisions of this
Section 6.5, in determining whether the holders of the requisite Undivided
Interests have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Certificates owned by the Transferor, the Servicer
or any Affiliate thereof shall be disregarded and deemed not to be
outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Certificates which the Trustee knows to be so owned
shall be so disregarded. Certificates so owned which have been pledged in good
faith shall not be disregarded and may be regarded as outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so
to act with respect to such Certificates and that the pledgee is not the United
States, the Transferor, the Servicer or an Affiliate thereof .
SECTION 6.6 APPOINTMENT OF PAYING AGENT. The Paying Agent shall make
distributions to Investor Certificateholders from the Collection Account (or
any other account or accounts maintained for the benefit of Certificateholders
as specified in the related Supplement for any Series) pursuant to Articles IV
and V. Any Paying Agent shall have the revocable power to withdraw funds from
the Collection Account (or any other account or accounts maintained for the
benefit of Certificateholders as specified in the related Supplement for any
Series) for the purpose of making the distributions referred to above. The
Trustee (or the Servicer if the Trustee is the Paying Agent) may revoke such
power and remove the Paying Agent if the Trustee (or the Servicer if the
Trustee is the Paying Agent) determines in its sole discretion that the Paying
Agent shall have failed to perform its obligations under this Agreement in any
material respect or for other good cause. The Paying Agent shall (unless
otherwise specified in the related Supplement for any Series) initially be the
Trustee and any co-paying agent chosen by the Transferor and acceptable to the
Trustee, including, if and so long as any Series of Investor Certificates is
listed on the Luxembourg Stock Exchange or other stock exchange and such
exchange so requires, a co-paying agent in Luxembourg or the location of such
other stock exchange. The Trustee shall be permitted to resign as Paying
Agent upon 30 days' prior written notice to the Servicer and the Transferor;
provided, however, that such resignation shall not be effective and the Trustee
shall continue to perform the duties of Paying Agent until
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the appointment of a successor Paying Agent, pursuant to this Section 6.6. The
Transferor shall notify the Rating Agencies and the Trustee (if it is not then
serving as the Paying Agent) of any resignation or replacement of the Paying
Agent. In the event that the Trustee shall no longer be the Paying Agent, the
Transferor shall appoint a successor to act as Paying Agent and such successor
shall be acceptable to the Trustee. The Trustee shall cause the initial Paying
Agent (unless the initial Paying Agent is the Trustee) and each successor
Paying Agent or any additional Paying Agent appointed by the Transferor to
execute and deliver to the Trustee an instrument in which such initial or
successor Paying Agent or additional Paying Agent shall agree with the Trustee
that, as Paying Agent, such initial or successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the Investor
Certificateholders in trust for the benefit of the Investor Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders. The
Paying Agent shall return all unclaimed funds to the Trustee and upon removal
of a Paying Agent shall also return all funds in its possession to the Trustee.
The provisions of Sections 11.1, 11.2 and 11.3 shall apply to the Trustee also
in its role as Paying Agent, for so long as the Trustee shall act as Paying
Agent. Any reference in this Agreement to the Paying Agent shall include any
co-paying agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding and such Investor
Certificates are held by the related Certificate Owners as Definitive
Certificates (for Registered Certificates not held in book-entry form, the
Transferor shall, if the Paying Agent is not located in New York City, appoint
a co-paying agent in New York City acceptable to the Trustee or any other city
designated in such Supplement which, if and so long as any Series of Investor
Certificates is listed on the Luxembourg Stock Exchange or other stock exchange
and such exchange so requires, shall be in Luxembourg or such other locations
required by such other stock exchange.
SECTION 6.7 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
The Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to the Servicer or the Paying Agent (or any agent thereof), within
five Business Days after receipt by the Trustee of a request therefor from the
Servicer or the Paying Agent, respectively, in writing, a list in the form
maintained by the Trustee, of the names and addresses of the Investor
Certificateholders (other than Bearer Certificateholders). If Holders
representing Undivided Interests in the Trust aggregating not less than 10% of
the Investor Amount of the Investor Certificates of such Series (the
"Applicants") apply in writing to the Trustee, and such application states that
the Applicants desire to communicate with other Investor Certificateholders of
such Series with respect to their rights under this Agreement or under the
Investor Certificates and is accompanied by a copy of the communication which
such Applicants propose to transmit, then the Trustee, after having been
adequately indemnified by such Applicants for its costs and expenses,
and having given the Servicer notice that such request has been made together
with copies of such applications and proposed communications to Investor
Certificateholders, shall afford or shall cause the Transfer Agent and
Registrar to afford such Applicants access
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during normal business hours to the most recent list of Investor
Certificateholders (other than Bearer Certificateholders) held by the Trustee,
or shall mail or cause to be mailed such list within five Business Days after
the receipt of such application. Such list shall be as of a date no more than
45 days prior to the date of receipt of such Applicants' request.
Every Certificateholder, by receiving and holding a Certificate agrees
with the Trustee that none of the Trustee, the Transfer Agent and Registrar,
the Transferor, the Servicer or the Sellers, nor any of their respective agents
or representatives shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Investor
Certificateholders (other than Bearer Certificateholders) hereunder, regardless
of the sources from which such information was derived.
SECTION 6.8 AUTHENTICATING AGENT.
(a) The Trustee may appoint one or more authenticating agents with
respect to the Certificates which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an authenticating agent and a certificate of authentication executed
on behalf of the Trustee by an authenticating agent. Each authenticating agent
must be reasonably acceptable to the Transferor.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Transferor. The Trustee may at
any time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Transferor. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an authenticating agent shall cease to be acceptable to the Trustee or the
Transferor, the Trustee promptly may appoint a successor authenticating agent.
Any successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No successor authenticating agent shall be appointed unless acceptable to the
Trustee and the Transferor.
(d) The Trustee agrees to pay from its own funds, on behalf of the Trust,
to each authenticating agent from time to time reasonable compensation for its
services under this Section 6.8.
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(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable to
any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in the Master Pooling and
Servicing Agreement.
-----------------------
as Authenticating Agent
for the Trustee,
By:
--------------------
Authorized Officer"
SECTION 6.9 TENDER OF EXCHANGEABLE TRANSFEROR CERTIFICATE.
(a) The Transferor and the Trustee may at any time and from time to time
enter into one or more Supplements for the purpose of authorizing the issuance
by the Trust to the Transferor, one or more Series of Investor Certificates.
Upon any Exchange, the Trustee shall issue to the Transferor under Section 6.1
for execution (unless the Trustee is to execute such Series on behalf of the
Trust, as specified in the applicable Supplement) and redelivery to the Trustee
for authentication under Section 6.2 one or more new Series of Investor
Certificates. Any such Series of Investor Certificates shall be substantially
in the form specified in the applicable Supplement and shall bear, upon its
face, the designation for such Series to which it belongs so selected by the
Transferor. Except as specified in the Supplement for any Series as to
differing treatment of the Investor Certificates within such Series, all
Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
(b) The Holder of the Exchangeable Transferor Certificate may tender the
Exchangeable Transferor Certificate to the Trustee in exchange for (i) one or
more newly issued Series of Investor Certificates and (ii) a reissued
Exchangeable Transferor Certificate (any such tender an "Exchange"). The
Transferor may perform an Exchange by notifying the Trustee, in writing at
least three (3) days in advance (an "Exchange Notice") of the date upon which
the Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall state
the designation of any Series to be issued on the Exchange
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Date and, with respect to each such Series: (x) its Initial Investor Amount
(or the method for calculating such Initial Investor Amount), if any, which, in
the aggregate, at any time, may not be greater than the current principal
amount of the Exchangeable Transferor Certificate less the product of the
Minimum Transferor Interest Percentage and the Aggregate Principal Receivables
at such time, and (y) its Certificate Rate (or the method for allocating
interest payments or other cash flows to such Series), if any and (z) the
applicable Enhancement, if any, for such Investor Certificates. On the
Exchange Date, the Trustee shall authenticate and deliver any such Series only
upon delivery to it of the following: (A) a Supplement in form satisfactory to
the Trustee executed by the Transferor and specifying the Principal Terms of
such Series, (B) the applicable Enhancement, if any, (C) an Opinion of Counsel
to the effect that, unless otherwise specified in the related Supplement, the
newly issued Series of Investor Certificates will be characterized as either
indebtedness or an interest in a partnership under existing law for Federal
income tax purposes and that the issuance of the newly issued Series of
Investor Certificates will not have any material adverse effect on the Federal
income tax characterization of any outstanding Series of Investor Certificates
that have been the subject of a previous opinion of tax counsel or result in
the Trust being taxable as an association for Federal or applicable state tax
purposes (such opinion, a "Tax Opinion"), (D) an agreement, if any, pursuant to
which the Enhancement Provider agrees to provide Enhancement, (E) written
confirmation from each Rating Agency that the Exchange will satisfy the Rating
Agency Condition and (F) the existing Exchangeable Transferor Certificate,
together with a written certification from the Transferor that the Transferor
Amount is at least equal to the Minimum Transferor Amount. Upon satisfaction
of such conditions, the Trustee shall cancel the existing Exchangeable
Transferor Certificate and issue, as provided above, such Series of Investor
Certificates and new Exchangeable Transferor Certificate, dated the Exchange
Date.
(c) In conjunction with an Exchange, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any Series
of Investor Certificates, which may include, without limitation: (i) its name
or designation, (ii) an Initial Investor Amount or the method of calculating
the Initial Investor Amount, (iii) a Certificate Rate or Certificate Rates (or
formula for the determination thereof), (iv) the rights of the Holder of the
Exchangeable Transferor Certificate that have been transferred to the Holders
of such Series pursuant to such Exchange, (v) the interest payment date or
dates and the date or dates from which interest shall accrue, (vi) the method
of allocating Collections of Principal Receivables for such Series and, if
applicable, with respect to other Series and the method by which the principal
amount of Investor Certificates of such Series shall amortize or accrete and
the method for allocating Collections of Finance Charge Receivables and
Receivables in Defaulted Accounts, (vii) the names of any accounts to be used
by such Series and the terms governing the operation of any such
account, (viii) the Servicing Fee Percentage, (ix) the Minimum Transferor
Interest Percentage, (x) the Minimum Aggregate Principal Receivables, (xi) the
Series Termination Date, (xii) the terms of Enhancement, if any, (xiii) the
Enhancement Provider, if any, (xiv) the base rate, if any, (xv) the Repurchase
Terms or the terms on which the Certificates of such Series may be remarketed
to other investors, (xvi) any deposit into any account
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provided for such Series, (xvii) the number of classes of such Series, and if
more than one class, the rights and priorities of each such class, (xviii) the
extent to which the Investor Certificates will be issuable in temporary or
permanent global form, and in such case, the depository for such global
certificate or certificates, the terms and conditions, if any, upon which such
global certificate may be exchanged in whole or in part for Definitive
Certificates, and the manner in which any interest payable on a temporary or
global certificate will be paid, (xix) whether the Certificates may be issued
in bearer form and any limitations imposed thereon and provisions relating to
compliance with applicable laws and rules for bearer instruments, (xx) the
priority of any Series with respect to any other Series, and (xxi) any other
relevant terms of such Series (all such terms, the "Principal Terms" of such
Series). The terms of such Supplement may modify or amend the terms of this
Agreement solely as applied to such new Series. If on the date of the issuance
of such Series, there is issued and outstanding no Series of Investor
Certificates which is currently rated by a Rating Agency, then as a condition
to such Exchange, a nationally recognized investment banking firm or commercial
bank (which may include NationsBanc Capital Markets, Inc.) shall also deliver
to the Trustee an opinion stating, in substance, that the Exchange will not
have an adverse effect on the timing or distribution of payments to such other
Series of Investor Certificates then issued and outstanding.
(d) The creation or sale of any additional interest in the Trust or the
Receivables, whether or not designated as an Exchange (including, but not
limited to, the receipt by the Trust or the Transferor of the proceeds of any
loan or additional loan provided by an Enhancement Provider) shall require the
delivery of a Tax Opinion with respect to such interest.
SECTION 6.10 GLOBAL CERTIFICATE; EURO-CERTIFICATE EXCHANGE DATE.
(a) If specified in the related Supplement for any Series, the Investor
Certificates may be initially issued in the form of a single temporary Global
Certificate (the "Global Certificate") in bearer form, without interest
coupons, in the denomination of the Initial Investor Amount and substantially
in the form attached to the applicable Supplement. Unless otherwise specified
in the applicable Supplement, the provisions of this Section 6.10 shall apply
to such Global Certificate. The Global Certificate will be authenticated by
the Trustee upon the same conditions, in substantially the same manner and with
the same effect as the Definitive Certificates. The Global Certificate may be
exchanged as described in this Section 6.10 or in the applicable Supplement for
Bearer Certificates and/or Registered Certificates in definitive form (the
"Definitive Euro-Certificates"). Notwithstanding the foregoing, no
Certificates shall be issued in bearer form unless the Transferor has
determined, and delivers an Opinion of Counsel to the Trustee substantially to
the effect that, the terms and procedures governing issuance and transfer of
such Certificates result in favorable treatment to Investor Certificateholders
under the Bearer Rules.
(b) The Manager shall, upon its determination of the date of completion
of the distribution of the Certificates, so advise the Trustee, the Transferor,
the Common
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Depositary, and each Foreign Clearing Agency in writing forthwith. Without
unnecessary delay, but prior to the Euro-Certificate Exchange Date, the
Transferor will execute and deliver to the Trustee at its office or to the
Trustee's designated agent outside the United States definitive Bearer
Certificates in an aggregate principal amount equal to the Initial Investor
Amount. All Bearer Certificates so issued and delivered will have Coupons
attached. The Global Certificate may be exchanged for an equal aggregate
principal amount of Definitive Euro-Certificates only on or after the
Euro-Certificate Exchange Date. A United States institutional investor will be
required to deliver to the Transferor, the Trustee and the Manager at the time
of its purchase of Registered Certificates a signed certificate substantially
in the form attached to the Supplement for the related Series. Upon any demand
for exchange for Definitive Certificates in accordance with this paragraph, the
Transferor shall cause the Trustee to authenticate and deliver the Definitive
Certificates to the Holder (x) outside the United States, in the case of Bearer
Certificates, and (y) according to the instructions of the Holder, in the case
of Registered Certificates, but only upon presentation to the Trustee of a
written statement substantially in the form attached to the Supplement for the
related Series with respect to the Global Certificate or portion thereof being
exchanged signed by a Foreign Clearing Agency, to the effect that it has
received in writing or by tested telex a certification substantially in the
form of the certificate attached to the Supplement for the related Series, such
certificate being dated no earlier than 15 days prior to the Euro-Certificate
Exchange Date and signed by or on behalf of the person appearing in the records
of a Foreign Clearing Agency as the beneficial owner of the Global Certificate
or portion thereof being exchanged. Upon receipt of such certification, the
Trustee shall cause the Global Certificate to be endorsed in accordance with
paragraph (d) below. Unless otherwise provided in the applicable Supplement,
any exchange as provided in this Section 6.10(b) shall be made free of charge
to the holders and the beneficial owners of the Global Certificate and to the
beneficial owners of the Definitive Euro-Certificates issued in exchange,
except that a person receiving Definitive Euro-Certificates must bear the cost
of insurance, postage, transportation and the like in the event that such
person does not receive such Definitive Euro-Certificates in person at the
offices of a Foreign Clearing Agency.
(c) The delivery to the Trustee by a Foreign Clearing Agency of any
written statement referred to above may be relied upon by the Transferor and
the Trustee as conclusive evidence that a corresponding certification or
certifications has or have been delivered to such Foreign Clearing Agency,
pursuant to the terms of this Agreement.
(d) Upon any such exchange of all or a portion of the Global Certificate
for a Definitive Euro-Certificate or Certificates, such Global Certificate
shall be endorsed by or on behalf of the Trustee to reflect the reduction of
its principal amount by an amount equal to the aggregate principal amount of
such Definitive Euro-Certificate or Certificates. Until so exchanged in full,
such Global Certificate shall in all respects be entitled to the same benefits
under this Agreement as Definitive Euro-Certificates authenticated and
delivered hereunder, except that the beneficial owners of such Global
Certificate shall not be entitled to receive payments of interest on the
Certificates until they have exchanged their beneficial interests in such
Global Certificate for Definitive Euro-Certificates.
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SECTION 6.11 BOOK-ENTRY CERTIFICATES. Unless otherwise provided in
any related Supplement, the Investor Certificates, upon original issuance, will
be issued in the form of the requisite number of typewritten Certificates
representing the Book-Entry Certificates, to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of, the
Transferor. The Investor Certificates shall initially be registered on the
Certificate Register in the name of Cede, the nominee of the Clearing Agency,
and no Certificate Owner will receive a definitive certificate representing
such Certificate Owner's interest in the Investor Certificates, except as
provided in Section 6.13. Unless and until definitive, fully registered
Investor Certificates (the "Definitive Certificates") have been issued to
Certificate Owners pursuant to Section 6.13:
(i) the provision of this Section 6.11 shall be in full
force and effect;
(ii) the Transferor, the Servicer, the Paying Agent, the
Transfer Agent and Registrar and the Trustee may deal with the
Clearing Agency for all purposes (including the making of
distributions on the Investor Certificates) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.11
conflict with any other provisions of this Agreement, the
provisions of this Section 6.11 shall control;
(iv) the rights of Certificate Owners shall be exercised
only through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, unless and until Definitive Certificates are
issued pursuant to Section 6.13, the initial Clearing Agency will
make book-entry transfers among the Clearing Agency Participants
and receive and transmit distributions of principal and interest
on the Investor Certificates to such Clearing Agency Participants;
and
(v) whenever this Agreement requires or permits actions to
be taken based upon instructions or directions of a specified
percentage of the Investor Amount of any or all Series of Certificates
outstanding, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to such
effect from Certificate Owners and/or Clearing Agency Participants owning
or representing, respectively, such required percentage of the beneficial
interest in Investor Certificates.
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SECTION 6.12 NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Investor Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 6.13, the Trustee, the Servicer and the
Paying Agent shall give all such notices and communications specified herein to
be given to Holders of the Investor Certificates to the Clearing Agencies.
SECTION 6.13 DEFINITIVE CERTIFICATES. If Book-Entry Certificates have
been issued pursuant to Section 6.11 and if (i)(A) the Transferor advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge properly its responsibilities under the Depository Agreement, and (B)
the Trustee or the Transferor is unable to locate a qualified successor (which
successor must be treated as maintaining a book-entry system within the meaning
of Section 163(f)(3) of the Code), (ii) the Transferor at its option, advises
the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency with respect to the Certificates or (iii) after the
occurrence of a Servicer Default, Certificate Owners representing beneficial
interests aggregating more than 50% of the Investor Amount of any Series advise
the Trustee and the Clearing Agency through the Clearing Agency Participants in
writing that the continuation of a book-entry system through the Clearing
Agency is no longer in the best interests of the Certificate Owners, the
Trustee shall notify the Certificate Owners, through each applicable Clearing
Agency, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Trustee of the Investor Certificates by the Clearing Agency,
accompanied by registration instructions from the Clearing Agency for
registration, the Trustee shall issue the Definitive Certificates. None of the
Servicer, the Transferor, the Transfer Agent and Registrar nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed upon and performed by the Trustee to the extent applicable
with respect to such Definitive Certificates and the Trustee shall recognize
the Holders of the Definitive Certificates as Certificateholders hereunder.
SECTION 6.14 MEETINGS OF CERTIFICATEHOLDERS.
(a) Unless not permitted by the Supplement for any Series issued in whole
or in part in Bearer Certificates, the Transferor, the Servicer or the Trustee
may at any time call a meeting of the Certificateholders of such Series or of
all Series, to be held at such time and at such place as the Transferor, the
Servicer or the Trustee, as the case may be, shall determine, for the purpose
of approving a modification of or amendment to, or obtaining a waiver of, any
covenant or condition set forth in this Agreement with respect to such Series
or in the Certificates of such Series, subject to Section 13.1. References in
this Section 6.14 to Certificateholders shall be deemed to refer to the
Exchangeable Transferor Certificates and only those Series of Investor
Certificates for which this Section 6.14 is applicable. Notice of any meeting
of Certificateholders, setting forth the time and
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place of such meeting and in general terms the action proposed to be taken at
such meeting, shall be given in accordance with Section 13.5 and at least once
in an Authorized Newspaper and, if and for so long as the Certificates are
listed on the Luxembourg Stock Exchange or other stock exchange and such
exchange so requires, in a newspaper of general circulation in Luxembourg
(which newspaper shall be printed in the English or French language and
customarily published on each business day in Luxembourg) or the location
required by such other stock exchange, the first publication to be not less
than 20 nor more than 180 days prior to the date fixed for the meeting. To be
entitled to vote at any meeting of Certificateholders, a person shall be (i) a
Holder of one or more Certificates of the applicable Series or (ii) a person
appointed by an instrument in writing as proxy by the Holder of one or more
Certificates. The only Persons who shall be entitled to be present or to speak
to any meeting of Certificateholders shall be the Persons entitled to vote at
such meeting and their counsel and any representatives of the Transferor, the
Servicer and the Trustee and their respective counsels.
(b) At a meeting of Investor Certificateholders, persons entitled to vote
Investor Certificates evidencing Undivided Interests aggregating a majority of
the Investor Amount of the applicable Series or all outstanding Series, as the
case may be, shall constitute a quorum. No business shall be transacted in the
absence of a quorum, unless a quorum is present when the meeting is called to
order. In the absence of a quorum at any such meeting, the meeting may be
adjourned for a period of not less than 10 days; in the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further adjourned for
a period of not less than 10 days; at the reconvening of any meeting further
adjourned for lack of a quorum, the Persons entitled to vote at least 25% in
Undivided Interest of the applicable Series or all outstanding Series, as the
case may be, shall constitute a quorum for the taking of any action set forth
in the notice of the original meeting. Notice of the reconvening of any
adjourned meeting shall be given as provided above, except that such notice
must be given not less than five (5) days prior to the date on which the
meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned meeting shall state expressly the percentage of the aggregate
principal amount of the outstanding Investor Certificates which shall
constitute a quorum.
(c) Any Certificateholder who has executed an instrument in writing
appointing a person as proxy shall be deemed to be present for the purposes of
determining a quorum and be deemed to have voted; provided that such
Certificateholders shall be considered as present or voting only with respect
to the matters covered by such instrument in writing. Subject to the
provisions of Section 13.1, any resolution passed or decision taken at any
meeting of Investor Certificateholder duly held in accordance with this Section
6.14 shall be binding on all the Investor Certificateholders whether or not
present or represented at the meeting.
(d) The holding of Bearer Certificates shall be proved by the production
of such Bearer Certificates or by a certificate, satisfactory to the Servicer
and the Trustee, executed by any bank, trust company or recognized securities
dealer, wherever situated, satisfactory to the Servicer and the Trustee. Each
such certificate shall be dated and shall
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state that on the date thereof a Bearer Certificate bearing a specified serial
number was deposited with or exhibited to such bank, trust company or
recognized securities dealer by the person named in such certificate. Any such
certificate may be issued in respect of one or more Bearer Certificates
specified therein. The holding by the person named in any such certificate of
any Bearer Certificate specified therein shall be presumed to continue for a
period of one year from the date of such certificate unless at the time of any
determination of such holding (i) another certificate bearing a later date
issued in respect of the same Bearer Certificate shall be produced, (ii) the
Bearer Certificate specified in such certificate shall be produced by or
certified by a bank, trust company or recognized securities dealer on behalf of
some other person or (iii) the Bearer Certificate specified in such certificate
shall have ceased to be outstanding. The appointment of any proxy shall be
proved by having the signature of the person executing the proxy guaranteed by
any bank, trust company or recognized securities dealer satisfactory to the
Trustee. The holding of Registered Certificates shall be proved by the
Certificate Register or by a certificate or certificates of the Transfer Agent
and Registrar.
(e) The Trustee shall appoint a temporary chairman of the meeting. A
permanent chairman and a permanent secretary of the meeting shall be elected by
vote of the holders of a majority in Undivided Interest of the Certificates of
such Series represented at the meeting. No vote shall be cast or counted at
any meeting in respect of any Certificate challenged as not outstanding and
ruled by the chairman of the meeting to be not outstanding. The chairman of
the meeting shall have no right to vote except as a Certificateholder or proxy.
Any meeting of Certificateholders duly called at which a quorum is present may
be adjourned from time to time, and the meeting may be held as so adjourned
without further notice.
(f) The vote upon any resolution submitted to any meeting of
Certificateholders shall be by written ballot on which shall be subscribed the
signatures of the Certificateholders or proxies and on which shall be inscribed
the serial number or numbers of the Certificates held or represented by them.
The permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate
of the proceedings of each meeting of Certificateholders shall be prepared by
the secretary of the meeting and there shall be attached to said record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts setting
forth a copy of the notice of the meeting and showing that said notice was
published as provided above. The record shall be signed and verified by the
permanent chairman and secretary of the meeting and one of the duplicates shall
be delivered to the Servicer and the other to the Trustee to be preserved by
the Trustee, the latter to have attached thereto the ballots voted at the
meeting. Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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ARTICLE VII
OTHER MATTERS RELATING
TO THE TRANSFEROR
SECTION 7.1 LIABILITY OF THE TRANSFEROR. The Transferor shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Transferor in such capacity herein.
SECTION 7.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE TRANSFEROR. The Transferor shall not consolidate with or
merge into any other business entity or convey or transfer its properties and
assets substantially as an entirety to any Person, unless:
(i) the entity formed by such consolidation or into which
the Transferor is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Transferor
substantially as an entirety shall be organized and existing under
the laws of the United States of America or any State or the
District of Columbia, a national banking association or a state
banking corporation or other depository entity whose deposits are
insured by the FDIC which is not subject to the bankruptcy laws of
the United States of America, or a single purpose, bankruptcy
remote entity that is organized under the laws of any state of the
United States, in each case, which is wholly-owned (other than
director qualifying shares) directly or indirectly, by Proffitt's,
Inc. or its successors or assigns, and meets the Rating Agency
Condition and if the Transferor is not the surviving entity, shall
expressly assume, by an agreement supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee,
the performance of every covenant and obligation of the
Transferor, as applicable, hereunder and shall benefit from all
the rights granted to the Transferor, as applicable, hereunder.
To the extent that any right, covenant or obligation of the
Transferor is inapplicable to the successor entity, such successor
entity shall be subject to such covenant or obligation, or benefit
from such right, as would apply, to the extent practicable, to
such successor entity;
(ii) no Pay Out Event shall occur as a result of any such
consolidation, merger, conveyance or transfer;
(iii) the Transferor has delivered to the Trustee an
Officer's Certificate signed by a Vice President or more senior
officer of the Transferor and an Opinion of Counsel each stating
that such consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 7.2 and that all
conditions precedent herein provided for relating to such
transaction have been complied with;
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(iv) the Transferor shall have delivered written notice of
such consolidation, merger, conveyance or transfer to the Trustee,
each Rating Agency assigning a rating to any class of Investor
Certificates of any then outstanding Series, each Person, if any,
specified in the Supplement with respect to each class of Investor
Certificates of any then outstanding Series which is not assigned
a rating by any Rating Agency and each Enhancement Provider; and
(v) the Transferor shall have received written notice from
each Rating Agency that such consolidation, merger, conveyance or
transfer will not result in a downgrading or withdrawal of its
then current rating of any outstanding Series of Investor
Certificates and shall have delivered copies of each such written
notice to the Servicer, the Trustee and each Person, if any
specified in the Supplement with respect to each class of Investor
Certificates of any then outstanding Series which is not assigned
a rating by any Rating Agency.
(b) The obligations of the Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of the Transferor
hereunder except in each case in accordance with the provisions of the
foregoing paragraph.
SECTION 7.3 LIMITATION ON LIABILITY OF THE TRANSFEROR. The
directors, officers, employees, agents and representatives of the Transferor
shall not be under any liability to the Trust, the Servicer, the Trustee, the
Certificateholders, any Enhancement Provider, if any, or any other Person
hereunder or pursuant to any document delivered hereunder, it being expressly
understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement and any
Supplement and the issuance of the Certificates; provided, however, that this
provision shall not protect the officers, directors, employees or agents of the
Transferor against any liability which would otherwise be imposed by reason of
bad faith or gross negligence in the performance of duties hereunder. Except
as provided in Sections 7.1 or 7.4, the Transferor shall not be under any
liability to the Trust, the Servicer, the Trustee, the Certificateholders, any
Enhancement Provider or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Transferor pursuant to this
Agreement or any Supplement, however arising under this Agreement or any
Supplement; provided, however, that this provision shall not protect the
Transferor against any liability which would otherwise be imposed by reason of
its bad faith or gross negligence in the performance of its duties as
Transferor hereunder. The Transferor and any director, officer, employee,
agent or representative of the Transferor may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
[SECTION 7.4 LIABILITIES. Notwithstanding Section 7.3, by entering
into this Agreement, the Transferor agrees to be liable, directly to the
injured party, for the
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entire amount of any losses, claims, damages, expenses, or liabilities related
to (other than those incurred by a Certificateholder in the capacity of an
investor in the Investor Certificates as a result of the performance of the
Receivables, market fluctuations, a shortfall in any Enhancement or other
similar market or investment risks) or arising out of or based on the
arrangement created by this Agreement and the actions of the Servicer taken
pursuant hereto as though this Agreement created a partnership under the
Uniform Partnership Act in Alabama, Mississippi and Nevada. The Transferor
agrees to pay, indemnify and hold harmless each Investor Certificateholder
against and from any and all such losses, claims, expenses, damages and
liabilities (other than those incurred by a Certificateholder in the capacity
of an investor in the Investor Certificates as a result of the performance of
the Receivables, market fluctuations, a shortfall in any Enhancement or other
similar market or investment risks) arising as a result of the Trust not being
taxed as a partnership under the income tax laws of the States of Alabama,
Minnesota, Mississippi and/or Nevada, except to the extent that they arise from
any action or omission by such Investor Certificateholders. Subject to
Sections 8.3 and 8.4, in the event of a Service Transfer, the Successor
Servicer will indemnify and hold harmless the Transferor for any losses,
claims, damages and liabilities of the Transferor as described in this Section
7.4 arising from the actions or omissions of such Successor Servicer.]
ARTICLE VIII
OTHER MATTERS RELATING
TO THE SERVICER
SECTION 8.1 LIABILITY OF THE SERVICER. The Servicer shall be
liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer in such capacity herein.
SECTION 8.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER. The Servicer shall not consolidate with or merge
into any other business entity or convey or transfer its properties and assets
substantially as an entirety to any Person, unless:
(i) the entity formed by such consolidation or into which
the Servicer is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Servicer
substantially as an entirety shall be organized and existing under
the laws of the United States of America or any State or the
District of Columbia, or shall be a national banking association,
state banking corporation or other entity which is not subject to
the bankruptcy laws of the United States of America, and if the
Servicer is not the surviving entity, shall be an Eligible
Servicer and shall expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of
every covenant and obligation of the
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Servicer, as applicable, hereunder and shall benefit from all the
rights granted to the Servicer, as applicable, hereunder. To the extent
that any right, covenant or obligation of the Servicer is inapplicable to
the successor entity, such successor entity shall be subject to such
covenant or obligation, or benefit from such right, as would apply, to
the extent practicable, to such successor entity;
(ii) the Servicer has delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such
supplemental agreement comply with this Section 8.2 and that all
conditions precedent herein provided for relating to such
transaction have been complied with;
(iii) the Servicer shall have received written notice from
each Rating Agency that such assignment and succession will not
result in a downgrading or withdrawal of its then current rating
of any outstanding Series of Investor Certificates and shall have
delivered copies of each such notice to the Transferor and the
Trustee and each Person, if any, specified in the Supplement with
respect to each class of Investor Certificates of any then
outstanding Series which is not assigned a rating by any Rating
Agency.
(iv) The Transferor shall have delivered written notice of
such consolidation, merger, conveyance or transfer to the Trustee,
each Rating Agency assigning a rating to any class of Investor
Certificates of any then outstanding Series, and each Person, if
any, specified in the Supplement with respect to each class of
Investor Certificates of any then outstanding Series which is not
assigned a rating by any Rating Agency, and each Enhancement
Provider; and
The Servicer shall promptly advise the Rating Agencies in writing of any such
consolidation, merger, conveyance or transfer.
SECTION 8.3 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS. The
directors, officers, employees, agents and representatives of the Servicer
shall not be under any liability to the Trust, the Transferor, the Trustee, the
Certificateholders, any Enhancement Provider or any other Person hereunder or
pursuant to any document delivered hereunder, it being expressly understood
that all such liability is expressly waived and released as a condition of, and
as consideration for, the execution of this Agreement and any Supplement and
the issuance of the Certificates; provided, however, that this provision shall
not protect the directors, officers, employees or agents of the Servicer
against any liability which would otherwise be imposed by reason of bad faith
or negligence in the performance of the Servicer's express duties hereunder.
Except as provided in Section 8.4, the Servicer shall not be under any
liability to the Trust, the Transferor, the Trustee, the Certificateholders,
any Enhancement Provider or any other
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Person for any action taken or for refraining from the taking of any action in
its capacity as Servicer pursuant to this Agreement or any Supplement, however
arising under this Agreement or any Supplement; provided, however, that this
provision shall not protect the Servicer against any liability which would
otherwise be imposed by reason of bad faith or gross negligence in the
performance of its duties as Servicer hereunder. The Servicer and any
director, officer, employee, agent, or representative of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Receivables in
accordance with this Agreement or any Supplement and which in its reasonable
opinion may involve it in any expense or liability.
SECTION 8.4 INDEMNIFICATION OF THE TRUST AND THE TRUSTEE. The Servicer
shall indemnify and hold harmless the Transferor, the Trust, for the benefit of
the Certificateholders, and the Trustee, including its officers, directors,
agents and employees, from and against any loss, liability, expense, damage or
injury suffered or sustained by them and arising out of or relating to any
claims, actions or proceedings brought or asserted by third parties regarding
the activities of the Trust or the Trustee for which the Servicer is
responsible pursuant to this Agreement or any Supplement, including but not
limited to any judgment, award, settlement, reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual
or threatened action, proceeding or claim; provided, however, that the Servicer
shall not indemnify (a) the Transferor, the Trust or the Trustee or their
respective officers, directors, agents and employees for liabilities imposed by
reason of fraud, negligence or breach of fiduciary duty by (i) the Trustee in
the performance of its duties under this Agreement or (ii) the Transferor or
any Certificateholders, (b) the Transferor, the Trust, the Trustee, the
Certificate Owners or the Certificateholders for liabilities arising from
actions taken by the Trustee at the request of Certificateholders, (c) the
Transferor, the Trust, the Trustee, the Certificate Owners or the
Certificateholders as to any losses, claims or damages incurred by a
Certificateholder or a Certificate Owner in its capacity as an investor,
including without limitation losses incurred as a result of Defaulted
Receivables or Receivables which are charged off as uncollectible or (d) the
Trust, the Trustee, the Certificate Owners or the Certificateholders for any
liabilities, costs or expenses of the Trust, the Trustee or the Certificate
Owners or Certificateholders arising under any tax law, including without
limitation any Federal, state or local income or franchise tax or any other tax
imposed on or measured by income (including any interest or penalties with
respect thereto or arising from a failure to comply therewith) required to be
paid by the Trust, the Certificate Owners or the Certificateholders in
connection with the Trust or this Agreement to any taxing authority. Except as
set forth in the preceding sentence, neither the Servicer nor any of its
directors, officers, employees or agents will be under any other liability to
the Trust, the Trustee, the Certificateholders or any other person for any
action taken, or for refraining from taking any action pursuant to this
Agreement. Neither the Transferor nor the Servicer nor any of their respective
directors, officers, employees or agents will be protected against any
liability which would otherwise be imposed by reason of bad faith or gross
negligence by or on behalf of the Transferor or the Servicer in the performance
of
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their respective duties hereunder. The Transferor and the Servicer will be
liable for any actual damages resulting directly from the material failure to
perform any of their respective obligations under this Agreement. In addition,
the Servicer is not under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its servicing responsibilities under
this Agreement and which in its opinion may expose it to any expense or
liability.
Subject to Sections 7.1 and 7.4 and Section 10.2(b) of the Agreement, any
indemnification pursuant to this Section 8.4 shall only be from the assets of
the Servicer. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the termination of this Agreement, the resignation and removal of the
Trustee and the payment in full of the Certificates.
SECTION 8.5 THE SERVICER NOT TO RESIGN. The Servicer shall not resign
from the obligations and duties hereby imposed on it as such except upon
determination that (i) the performance of its duties hereunder is or will
become impermissible under applicable law, regulation or order and (ii) there
is no reasonable action which the Servicer could take to make the performance
of its duties hereunder permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be evidenced as
to clause (i) of this Section by an Opinion of Counsel to such effect delivered
to the Trustee. No such resignation will become effective until the Trustee or
a Successor Servicer has assumed the Servicer's responsibilities and
obligations under this Agreement. If the Trustee is unable within 120 days of
the date of such determination to appoint a Successor Servicer pursuant to
Section 10.2(a), the Trustee or its duly appointed agent (which may not be the
outgoing Servicer) shall serve as Successor Servicer hereunder but the Trustee
shall have continued authority to appoint another Person as Successor Servicer.
SECTION 8.6 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
RECEIVABLES. The Servicer shall provide to the Trustee access to the
documentation regarding the Accounts and the Receivables in such cases where
the Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations, to
review such documentation, such access being afforded without charge but only
(i) upon reasonable request, (ii) during normal business hours, (iii) subject
to such security and confidentiality requirements and procedures as are
specified herein and/or which the Servicer may deem reasonably necessary and
(iv) at offices designated by the Servicer. Nothing in this Section 8.6 shall
derogate from the obligation of the Transferor, the Trustee or the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors and the failure of the Servicer to provide access as provided in this
Section 8.6 as a result of such obligation shall not constitute a breach of
this Section 8.6.
SECTION 8.7 DELEGATION OF DUTIES. It is understood and agreed by the
parties hereto that the Servicer may delegate certain of its duties hereunder
to any Person, including McRae, Inc., as Subservicer who agrees to conduct such
duties in accordance
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with the applicable Credit Card Guidelines and the terms of this Agreement.
The fees of any Person to whom such duties are delegated shall be paid for by
the Servicer, from any source, including the Monthly Servicing Fee. Any such
delegations shall not relieve the Servicer of its liability and responsibility
with respect to such duties, and shall not constitute a resignation within the
meaning of Section 8.5 hereof. If any such delegation is not in the ordinary
course of business, notification thereof shall be given by the Servicer to each
Rating Agency.
SECTION 8.8 EXAMINATION OF RECORDS. The Transferor and the Servicer
shall clearly and unambiguously identify each Account (including any Account
designated pursuant to Section 2.6) in its computer or other records to reflect
that the Receivables arising in such Account have been conveyed to the Trust
pursuant to this Agreement. The Transferor and the Servicer shall, prior to
the sale or transfer to a third party of any receivable held in its custody,
examine its computer and other records to determine that such receivable is not
a Receivable.
ARTICLE IX
PAY OUT EVENTS
SECTION 9.1 PAY OUT EVENTS. Unless modified with respect to any
Series of Investor Certificates by the Supplement for such Series, if any one
of the following events shall occur:
(a) the Transferor or the Company shall (i) become insolvent or
admit in writing its inability to generally pay its debts as they become
due or voluntarily and generally suspend payment of its obligations, (ii)
voluntarily seek, consent to, or acquiesce in the benefit or benefits of
any Debtor Relief Law, (iii) become a party to (or be made the subject
of) any proceeding provided for by any Debtor Relief Law, other than as a
creditor or claimant, and, in the event such proceeding is involuntary,
(A) within 10 Business Days after the Transferor or the Company
has knowledge of such proceeding or the filing thereof either (I) the
petition instituting same has not been dismissed or (II) an order has not
been entered by the court having jurisdiction which allows continued
transfer to the Trust of Principal Receivables with no adverse effect to
the Trust or the Certificateholders or (B) an order as contemplated in
(A)(II) above having previously been entered, is no longer in effect
other than by reason of the termination of such proceeding, or (iv)
become unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of this Agreement; or
(b) the Trust or the Transferor shall become an "investment company"
within the meaning of the 1940 Act; or
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then, a Pay Out Event with respect to all Series of Certificates then
outstanding shall occur without any notice or other action on the part of
the Trustee or all Investor Certificateholders immediately upon the
occurrence of such event. Upon actual notice of the occurrence of any
Pay Out Event, the Trustee shall advise (i) each Rating Agency assigning
a rating for any class of Investor Certificates of any then outstanding
Series and (ii) each Person, if any, specified in any Supplement with
respect to each class of Investor Certificates of any then outstanding
Series which is not rated by any Rating Agency, in writing of the
occurrence of any Pay Out Event.
SECTION 9.2 ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN EVENTS.
(a) If the Transferor voluntarily goes into liquidation or consents
to the appointment of a conservator, receiver or liquidator under any Debtor
Relief Laws with respect to the Transferor or of or relating to all or
substantially all its property, or a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the appointment
of a conservator or receiver or liquidator in any Debtor Relief Law
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor; or the Transferor shall admit in writing
its inability to pay its debts generally as they become due, files a petition
to take advantage of any applicable Debtor Relief Laws, makes an assignment for
the benefit of its creditors or voluntarily suspends payment of its obligations
generally; or the Transferor shall become unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this Agreement
(such voluntary liquidation, appointment, entering of such decree, admission,
filing, making, suspension or inability, a "Dissolution Event"), the Transferor
shall promptly give notice of such event to the Trustee, and the Transferor
shall on the day of such appointment, voluntary liquidation, entering of such
decree, admission, filing, making, suspension or inability, as the case may be
(the "Appointment Day"), immediately cease to transfer Principal Receivables to
the Trust hereunder. Notwithstanding any cessation of the transfer to the
Trust of additional Principal Receivables, Principal Receivables transferred to
the Trust prior to the occurrence of such Dissolution Event and Collections in
respect of such Principal Receivables and Finance Charge Receivables whenever
created shall continue to be part of the Trust, and such Collections shall
continue to be allocated, deposited and held in accordance with the provisions
'of Article IV. Within 15 days of the receipt by the Trustee of the notice of
a Dissolution Event, the Trustee shall (i) publish a notice in an Authorized
Newspaper that a Dissolution Event has occurred and that the Trustee intends to
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and (ii) send written notice to the Investor
Certificateholders and any Enhancement Provider entitled thereto describing the
provisions of this Section 9.2 and requesting instructions from such Holders,
which notice shall request each Investor Certificateholder to advise the
Trustee in writing that it elects one of the following options: (A) the
Investor Certificateholder wishes the Trustee to instruct the Servicer not to
sell, dispose of or otherwise liquidate the Receivables and to instruct the
Servicer to reconstitute the Trust upon the same terms and conditions set forth
herein, or (B) the
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Investor Certificateholder wishes the Trustee to instruct the Servicer to sell,
dispose of or otherwise liquidate the Receivables, or (C) the Investor
Certificateholder refuses to advise the Trustee as to the specific action the
Trustee shall instruct the Servicer to take. If after 90 days from the day
notice pursuant to clause (i) above is first published (the "Publication
Date"), the Trustee shall not have received written instructions of Holders of
Investor Certificates aggregating in excess of 50% of the related Investor
Amount of each Series (or in the case of a Series having more than one class of
Investor Certificates, each class of such Series) and each Holder of any
interest in the Exchangeable Transferor Certificate other than the Transferor
to the effect that the Trustee shall instruct the Servicer not to sell, dispose
of, or otherwise liquidate the Receivables and to instruct the Servicer to
reconstitute the Trust upon the same terms and conditions as set forth herein,
the Trustee shall instruct the Servicer to proceed to sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms, which shall include the solicitation of
competitive bids and the Servicer shall proceed to consummate the sale,
liquidation or disposition of the Receivables as provided above with the
highest bidder for the Receivables. If, however, with respect to the portion
of the Receivables allocable to any outstanding Series, the Holders of more
than 50% of the principal amount of each class of such Series and each Holder
of any interest in the Exchangeable Transferor Certificate other than the
Transferor, instruct the Trustee not to sell the portion of the Receivables
allocable to such Series, the Trust shall continue with respect to such Series
pursuant to the terms of the Agreement and the Supplement. If specified in the
applicable Supplement, the holder of an Enhancement Investor Amount with
respect to a Series shall be entitled to give instructions pursuant to this
Section 9.2 as if such Enhancement Investor Amount were a class of such Series.
The portion of the Receivables allocable to any Series shall be equal to the
sum of (1) the product of (A) the Transferor Percentage, (B) the Aggregate
Principal Receivables and (C) a fraction the numerator of which is the related
Investor Percentage with respect to Finance Charge Receivables and the
denominator of which is the sum of all Investor Percentages with respect to
Finance Charge Receivables of all Series outstanding and (2) the Investor
Amount of such Series. The Transferor or any of its Affiliates shall be
permitted to bid for the Receivables. In addition the Transferor or any of its
Affiliates shall have the right to match any bid by a third person and be
granted the right to purchase the Receivables at such matched bid price. The
Trustee may obtain a prior determination from the conservator or receiver that
the terms and manner of any proposed sale, disposition or liquidation are
commercially reasonable. The provisions of Sections 9.1 and 9.2 shall not be
deemed to be mutually exclusive.
(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to Section (a) above shall be treated as Collections on
the Receivables allocable to the Investor Certificateholders and shall be
allocated and deposited as Collections allocable to the Investor
Certificateholders of the applicable Series in accordance with the provisions
of Article IV; provided that the Trustee shall determine conclusively without
liability for such determination the amount of such proceeds which are
allocable to Finance Charge Receivables and the amount of such proceeds which
are allocable to Principal Receivables. On the day following the
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Distribution Date on which such proceeds are distributed to the Investor
Certificateholders (assuming that no Series elects to reconstitute the Trust),
the Trust shall terminate.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 SERVICER DEFAULTS. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer or deposit
or to give instructions or notice to the Trustee to make such payment, transfer
or deposit or to give notice to the Trustee as to any required drawing or
payment under any Enhancement on or before the date occurring five (5) Business
Days after the date such payment, transfer, deposit or drawing or such
instruction or notice is required to be made or given, as the case may be,
under the terms of this Agreement or any Supplement; provided, however, that
any such failure caused by circumstances beyond the Servicer's control shall
not constitute a Servicer Default if the Servicer promptly remedies such
failure within five (5) Business Days after receiving notice of such failure or
otherwise becoming aware of such failure;
(b) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or
any Supplement, which has a material adverse effect on the Certificateholders
of any Series then outstanding (without regard to the amount of any
Enhancement) and which continues unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by the Holders of Investor Certificates evidencing
Undivided Interests aggregating more than 50% of the Investor Amount of any
Series adversely affected thereby, and which continues to materially adversely
affect the rights of the Investor Certificateholders of any Series then
outstanding (without regard to the amount of any Enhancement); or the Servicer
shall delegate its duties under this Agreement, except as permitted by Section
8.7;
(c) any representation, warranty or certification made by the Servicer in
this Agreement or any Supplement or in any certificate delivered pursuant to
this Agreement or any Supplement shall prove to have been incorrect when made,
and which has a material adverse effect on the rights of the Certificateholders
of any Series then outstanding (without regard to the amount of any
Enhancement) and which continues to be incorrect in any material respect and
which continues to affect materially and adversely the rights of the
Certificateholders of any Series then outstanding (without regard to the amount
of any Enhancement) for a period of 60 days after the date on which written
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notice of such failure, requiring the same to be remedied, shall have been
given to the Servicer by the Trustee, or to the Servicer and the Trustee by the
Holders of Investor Certificates evidencing Undivided Interests aggregating
more than 50% of the Investor Amount of any Series adversely affected thereby;
or
(d) the Servicer shall consent to the appointment of a conservator,
receiver or liquidator under any Debtor Relief Law proceedings of or relating
to the Servicer or of or relating to all or substantially all of its property,
or a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or receiver
or liquidator in any Debtor Relief Law proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force undischarged or unstayed for
a period of 60 days; or the Servicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take advantage
of any applicable Debtor Relief Law, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations generally;
then, so long as such Servicer Default shall not have been remedied, either the
Trustee or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Investor Amount, by notice then
given in writing to the Servicer (and to the Trustee if given by the Investor
Certificateholders) (a "Termination Notice"), may terminate all of the rights
and obligations of the Servicer as Servicer under this Agreement and in and to
all Receivables and the proceeds thereof and appoint a new Servicer (a "Service
Transfer"). The rights and interests of the Transferor in the Transferor
Interest will not be affected by any Service Transfer.
The Transferor shall have the right to nominate to the Trustee a potential
Successor Servicer. The Trustee shall as promptly as possible appoint the
entity nominated by the Transferor if such entity meets the eligibility
criteria set out herein. If the Transferor does not nominate an entity to be
the Successor Servicer, the Trustee shall as promptly as possible appoint a
Successor Servicer, and if no Successor Servicer has been appointed by the
Trustee and has accepted such appointment by the time the Servicer ceases to
act as Servicer, all authority, power and obligations of the Servicer
under this Agreement will pass to, and be vested in, the Trustee. Prior to any
Service Transfer, the Trustee will seek to obtain bids from potential servicers
meeting the eligibility criteria set out herein, to serve as a Successor
Servicer for servicing compensation not in excess of the Servicing Fee. If the
Trustee is unable to obtain any bids from eligible entities and the Servicer
delivers an Officer's Certificate to the effect that it cannot in good faith
cure the related Servicer Default, then the Trustee will, under certain
circumstances, offer the Transferor the right to accept the reassignment of all
of the Receivables. The deposit amount of such a reassignment shall be equal
to the sum of the Aggregate Investor Amount (less the aggregate amounts held
in the Excess Funding Account and in any Principal Account with respect to any
Series) plus accrued and unpaid interest on the Certificates of all Series plus
certain amounts payable to Enhancement Providers, if applicable.
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The Trustee, upon giving or receiving a Termination Notice, shall
immediately notify the Rating Agencies and any Enhancement Provider of such
notice. After receipt by the Servicer of such Termination Notice, and on the
date that a Successor Servicer shall have been appointed by the Trustee
pursuant to Section 10.2, all authority and power of the Servicer under this
Agreement shall pass to and be vested in a Successor Servicer; and, without
limitation, the Trustee is hereby authorized and empowered (upon the failure of
the Servicer to cooperate) to execute and deliver, on behalf of the Servicer,
as attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such Service Transfer. The Servicer agrees to take all
reasonable actions to cooperate with the Trustee and such Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer to
conduct servicing hereunder, including, without limitation, the transfer to
such Successor Servicer of all authority of the Servicer to service the
Receivables provided for under this Agreement, including, without limitation,
all authority over all Collections which shall on the date of transfer be held
by the Servicer for deposit, or which have been deposited by the Servicer, in
the Collection Account, or which shall thereafter be received with respect to
the Receivables, and in assisting the Successor Servicer and in enforcing all
rights to Recoveries. The Servicer shall promptly transfer its electronic
records relating to the Receivables to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and shall
promptly transfer to the Successor Servicer all other records, correspondence
and documents necessary for the continued servicing of the Receivables in the
manner and at such times as the Successor Servicer shall reasonably request.
To the extent that compliance with this Section 10.1 shall require the Servicer
to disclose to the Successor Servicer information of any kind which the
Servicer reasonably deems to be confidential, the Successor Servicer shall be
required to enter into such customary licensing and confidentiality agreements
as the Servicer shall deem reasonably necessary to protect its interest.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in Section 10.1(a) for a period of 10 Business Days after the
applicable grace period or under Section 10.1(b) or (c) for a period of 60
Business Days after the applicable grace period shall not constitute a Servicer
Default if such delay or failure could not be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or public enemy, acts of declared or undeclared war, public
disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire,
hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns, floods,
power outages, communication system failures or outages or similar causes. The
preceding sentence shall not relieve the Servicer from using its best
reasonable efforts to perform its obligations in a timely manner in accordance
with the terms of this Agreement or any Supplement and the Servicer shall
provide the Trustee, any Enhancement Provider, the Transferor and the
Certificateholders with an Officer's Certificate giving prompt notice of such
failure or delay by it, together with a description of the cause of such
failure or delay
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and its efforts so to perform its obligations. The Servicer shall immediately
notify a Responsible Officer of the Trustee in writing of any Servicer Default.
SECTION 10.2 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 10.1, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice, or otherwise specified by the Trustee in
writing, until a date mutually agreed upon by the Servicer and Trustee (not to
exceed 90 days from the date of delivery of such notice). The Trustee shall as
promptly as possible after the giving of a Termination Notice appoint a
successor servicer (the "Successor Servicer"), with the consent of any
Enhancement Provider, and such Successor Servicer shall accept its appointment
by a written assumption in a form acceptable to the Trustee, the Transferor and
any Enhancement Provider. The Transferor shall have the right to nominate to
the Trustee the name of a potential successor servicer which nominee shall be
selected by the Trustee as the Successor Servicer, subject to the consent of
any Enhancement Provider. The Trustee may obtain bids from any potential
successor servicer. If the Trustee is unable to obtain any bids from any
potential successor servicer and the Servicer delivers an Officer's Certificate
to the effect that it cannot in good faith cure the Servicer Default which gave
rise to a transfer of servicing, then the Trustee shall notify each Enhancement
Provider that a sale of the Receivables is proposed and shall provide each
Enhancement Provider an opportunity to bid on the Receivables and shall offer
the Transferor the right of first refusal to purchase the Receivables on terms
equivalent to the best purchase offer as determined by the Trustee, but in no
event less than an amount equal to the Aggregate Investor Amount (less the
aggregate amount held in the Excess Funding Account and any Principal Account
with respect to any Series) on the date of such purchase plus all accrued but
unpaid interest on the Certificates of all Series at the applicable Certificate
Rates through the end of the applicable interest accrual periods of such Series
plus any other unpaid amounts required to be paid pursuant to this Section 10.2
under any Supplement; provided, however, that, if the Transferor shall not have
a rating of P-3 or Baa3 or higher by Moody's and A-3 or BBB- or higher by
Standard & Poor's, no such reassignment shall occur unless the Transferor shall
deliver to the Trustee and the Rating Agencies an Opinion of Counsel reasonably
acceptable to the Trustee that such reassignment would not constitute a
fraudulent conveyance. In the event that a Successor Servicer has not been
appointed and has not accepted its appointment at the time when the Servicer
ceases to act as Servicer, the Trustee (as trustee hereunder) without further
action shall automatically be appointed the Successor Servicer.
Notwithstanding the above, the Trustee shall, if it is legally unable so to
act, petition a court of competent jurisdiction to appoint any established
financial institution having a net worth of not less than $50,000,000 and whose
regular business includes the servicing of consumer revolving credit card
receivables as the Successor Servicer hereunder. Notwithstanding anything to
the contrary in this Agreement, the entire amount of the reassignment deposit
amount shall be distributed to the Investor Certificateholders of the related
Series on the subsequent
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Distribution Date for such Series pursuant to Section 12.3 (except for amounts
payable to any Enhancement Provider under the applicable Enhancement Agreement,
which amounts shall be distributed to such Enhancement Provider.)
(b) Upon its appointment, the Successor Servicer shall be the successor
in all respects to the Servicer with respect to all servicing functions under
this Agreement and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer by the terms and provisions
hereof, and all references in this Agreement to the Servicer shall be deemed to
refer to the Successor Servicer; provided, however, that, the outgoing Servicer
shall not be relieved of any liability hereunder for its actions prior to the
transfer of servicing hereunder; provided further, that the Successor Trustee
shall not be liable for any acts or omissions of the Servicer or for any breach
by the Servicer of any of its representations and warranties contained herein
or in any Supplement or amendment., by Officer's Certificate delivered in
connection herewith, and provided further, that, (i) the outgoing Servicer
shall not indemnify the Trust or the Trustee under Section 8.4 for acts,
omissions or alleged acts or omissions, including any involving negligence or
bad faith by a Successor Servicer and (ii) the outgoing Servicer shall not pay
or reimburse the Trustee pursuant to Section 11.5 for any expense, disbursement
or advance of the Trustee related to or arising as a result of the negligence
or bad faith of the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the
terms and provisions of any applicable Enhancement agreement.
(c) In connection with such appointment and assumption, the Trustee shall
be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no such compensation
shall be in excess of the Monthly Servicing Fee permitted to the Servicer
pursuant to Section 3.2.
(d) All authority and power granted to the Successor Servicer under this
Agreement shall automatically cease and terminate upon termination of the Trust
pursuant to Section 12.1 and shall pass to and be vested in the Transferor and,
without limitation, the Transferor is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact
or otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights. The Successor Servicer agrees to cooperate with
the Transferor in effecting the termination of the responsibilities and rights
of the Successor Servicer to conduct servicing on the Receivables. The
Successor Servicer shall transfer its electronic records relating to the
Receivables to the Transferor in such electronic form as the Transferor may
reasonably request and shall transfer all other records, correspondence and
documents to the Transferor in the manner and at such times as the Transferor
shall reasonably request. To the extent that compliance with this Section 10.2
shall require the Successor Servicer to disclose to the Transferor information
of any kind which the Successor Servicer deems to be confidential, the
Transferor shall be
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required to enter into such customary licensing and confidentiality agreements
as the Successor Servicer shall deem necessary to protect its interests.
SECTION 10.3 NOTIFICATION TO CERTIFICATEHOLDERS. Upon the occurrence of
any Servicer Default, the Servicer shall give prompt written notice thereof to
the Trustee, the Rating Agencies and any Enhancement Provider, and the Trustee
shall give notice to the Investor Certificateholders at their respective
addresses appearing in the Certificate Register. Upon any termination or
appointment of a Successor Servicer pursuant to this Article X, the Trustee
shall give prompt written notice thereof to Investor Certificateholders at
their respective addresses appearing in the Certificate Register, the Rating
Agencies and to any Enhancement Provider. Notice to Holders of Bearer
Certificates, if any, shall be given by publication in the manner described in
Section 13.5 of the Agreement.
SECTION 10.4 WAIVER OF PAST DEFAULTS. The Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 66-2/3% of
the Investor Amount of any Series then outstanding affected by any default by
the Servicer or the Transferor may, on behalf of all Holders of Certificates of
such affected Series, waive any default by the Servicer or the Transferor in
the performance of their respective obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments of
interest or principal with respect to any Series of Certificates. Upon any
such waiver of a past default, such default shall cease to exist, and any
default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
ARTICLE XI
THE TRUSTEE
SECTION 11.1 DUTIES OF TRUSTEE.
(a) The Trustee, prior to the occurrence of a Servicer Default and after
the curing or waiving of all Servicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If a Servicer Default has occurred (which has not
been cured or waived), the Trustee (as Trustee and not as Successor Servicer)
shall exercise such of the rights and powers vested in it by this Agreement or
any Supplement, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which
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are specifically required to be furnished pursuant to any provision of this
Agreement or any Supplement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement or any Supplement, but
shall not be required to verify the accuracy of any information, calculations
or conclusions stated therein.
(c) Subject to Section 11.1(a), no provision of this Agreement or any
Supplement shall be construed to relieve the Trustee from liability for its own
negligent action, its own bad faith, its own negligent failure to act or its
own willful misconduct; provided, however, that:
(i) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the direction of the Holders of Investor
Certificates evidencing Undivided Interests aggregating more than
50% of the Investor Amount of any Series adversely affected
thereby relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this
Agreement or any Supplement;
(iii) the Trustee shall not be charged with knowledge of any
failure by the Servicer (other than the Trustee, in its capacity as
Successor Servicer) to comply with the obligations of the Servicer
referred to in clauses (a), (b) and (c) of Section 10.1 unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure (it being understood that knowledge of the Servicer, in its
capacity as agent for the Trustee, is not attributable to the Trustee)
or the Trustee receives written notice of such failure from the
Servicer, any Holders of Investor Certificates evidencing Undivided
Interests aggregating more than 50% of the Investor Amount of any
Series adversely affected thereby or any Enhancement Provider; and
(iv) in making a determination of any material and adverse
effect upon Certificateholders or the Investor Certificates, the
Trustee may, as to matters of law, rely exclusively upon an
Opinion of Counsel.
(d) The Trustee (in its capacity as such) shall not be required to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder, or in exercise of any of its rights or powers,
if there is reasonable ground for believing that the repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it, and none of the provisions contained in this Agreement or any Supplement
shall in any event require the Trustee to perform, or be
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responsible for the manner of performance of, any of the obligations of the
Servicer or the Successor Servicer under this Agreement or any Supplement
except during such time, if any, as the Trustee shall be the Successor Servicer
in accordance with the terms of this Agreement or any Supplement.
(e) Except for actions expressly authorized by this Agreement or any
Supplement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Receivable now existing or hereafter created or
to impair the value of any Receivable now existing or hereafter created.
(f) Except as specifically provided in this Agreement, the Trustee shall
have no power to vary the corpus of the Trust.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall not be the Trustee and shall fail to perform any obligation,
duty or agreement in the manner or on the day required to be performed by the
Paying Agent or the Transfer Agent and Registrar, as the case may be, under
this Agreement, the Trustee shall be obligated promptly upon a Responsible
Officer of the Trustee having written notice or actual knowledge thereof to
perform such obligation, duty or agreement in the manner so required.
(h) Any action, suit or proceeding brought in respect of one or more
particular Series shall have no effect on the Trustee's rights, duties and
obligations hereunder with respect to any one or more Series not the subject of
such action, suit or proceeding.
(i) The Trustee shall, upon the reasonable request of the Transferor,
enter into any intercreditor agreement relating to the assets of the
Transferor; provided however, that the Trustee shall have received an Officer's
Certificate from the Transferor stating that the Transferor does not believe
that any such intercreditor agreement will materially and adversely affect any
outstanding Investor Certificates of any Series, and the Trustee shall have
received a reliance letter entitling it to rely upon any Opinions of Counsel to
the Transferor delivered in connection with such intercreditor agreement.
SECTION 11.2 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except as otherwise
provided in Section 11.1:
(a) the Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accord with, any resolution, Officer's Certificate,
Opinion of Counsel, certificate of independent public accountants or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document, including, without
limitation, any request or instruction by the Servicer or the Transferor to
make any deposit or payment or any draw on any Enhancement or to transfer any
Receivables or Accounts, prima facie properly executed and submitted to it
pursuant to this Agreement or any Supplement by the proper party or parties;
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(b) the Trustee may consult with counsel as to matters of law and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered or omitted by it
hereunder in good faith and in accordance with such Opinion of Counsel as to
any actions required to be taken or withheld hereunder;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Supplement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or Certificate
Owners or any Enhancement Provider, pursuant to the provisions of this
Agreement or any Supplement or any Enhancement, unless such Certificateholders
or Certificate Owners or such Enhancement Provider shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby; nothing contained herein
shall, however, relieve the Trustee (as Trustee but not as Successor Servicer)
of the obligations, upon the occurrence of any Servicer Default (which has not
been cured or waived), to exercise such of the rights and powers vested in it
by this Agreement or any Supplement, and to use the same degree of care and
skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs;
(d) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement or any
Supplement;
(e) except as may be required by Sections 11.1(a) or 11.1(b), the Trustee
shall not be bound to make any investigation into the facts of matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, except to
the extent specifically requested in writing so to do by Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 50% of the
Investor Amount of any Series which could be adversely affected if the Trustee
does not perform such acts and the Trustee is reasonably indemnified therefor;
(f) the Trustee (in its capacity as such) may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian, and the Trustee (in its capacity as
such) shall not be responsible for any misconduct or negligence on the part of
any such agent, attorney or custodian appointed with due care by it hereunder;
(g) except as may be required by Sections 11.1(a) or 11.1(b) hereof, the
Trustee shall not be required to make any initial or periodic examination of
any documents or records related to the Receivables or the Accounts for the
purpose of establishing the presence or absence of defects, the compliance by
the Transferor or Servicer with their representations, warranties or covenants
or for any other purpose;
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(h) the permissive right of the Trustee to take actions enumerated in
this Agreement or any Supplement shall in no event be construed as a duty;
(i) whenever in the administration of this Agreement or any Supplement,
the Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the absence
of bad faith on its part, rely upon an Officer's Certificate;
(j) except with respect to any Enhancement Investor Amount, the Trustee
shall not be deemed to be a fiduciary for the Enhancement Provider, if any, in
its capacity as such, and the Trustee's sole responsibility with respect to the
Enhancement Provider in its capacity as such shall be to perform those duties
with respect to the Enhancement Provider as are specifically set forth in the
related Enhancement agreement and no implied covenants shall be read into this
Agreement against the Trustee with respect to the Enhancement Provider;
(k) the Trustee shall have no duty (i) to see to any recording, filing or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest in
the Receivables or the Accounts, or to see to the maintenance of any such
recording, filing or depositing or any rerecording, refiling or redepositing of
any thereof or (ii) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee pursuant to this
Agreement believed by the Trustee to be genuine and to have been signed or
presented by the proper party or parties; and
(l) in the event the entity serving as Trustee hereunder is also serving
as Paying Agent or Transfer Agent and Registrar hereunder, the rights, powers,
immunities and indemnities afforded to the Trustee hereunder shall also be
afforded to such Paying Agent and Transfer Agent and Registrar.
SECTION 11.3 TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES. The Trustee
assumes no responsibility for the correctness of the recitals contained herein
and in the Certificates (other than the certificates of authentication on the
Certificates). Except as set forth in Section 2.2(a) or Section 11.15, the
Trustee makes no representations as to (i) the validity or sufficiency of this
Agreement or any Supplement or of the Certificates (other than the certificates
of authentication on the Certificates), (ii) the existence or validity of any
Receivable, (iii) the validity of any transfer or assignment of any Receivable
to the Trust, (iv) the validity of any grant of a security interest to the
Trust in any Receivable, (v) the perfection of any security interest (whether
as of the date hereof or at any future time) in any Receivable, (vi) the
maintenance of or the taking of any action to maintain such perfection, (vii)
the receipt by the Trustee or the Servicer of any Receivable, (viii) the
performance or enforcement of any Receivable, (ix) the compliance by the
Transferor or the Servicer with any covenant or representation, (x) the breach
by
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the Transferor or the Servicer of any warranty or representation made hereunder
or in any related document or the accuracy of any such warranty or
representation or (xi) any action taken by the Servicer in the name of the
Trustee. The Trustee shall not be accountable for the use or application by
the Transferor of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Transferor
in respect of the Receivables or deposited in or withdrawn from the Collection
Account or other accounts now or hereafter established to effectuate the
transactions contemplated herein and in accordance with the terms hereof.
SECTION 11.4 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its individual
or any other capacity may become the owner or pledgee of Investor Certificates
with the same rights as it would have if it were not the Trustee.
SECTION 11.5 THE SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES. The
Servicer covenants and agrees to pay to the Trustee from time to time out of
its own funds, and the Trustee shall be entitled to receive, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trust hereby created and in the exercise and
performance of any of the powers and duties hereunder or pursuant to any
Supplement of the Trustee, and, subject to Section 8.4, the Servicer will pay
or reimburse the Trustee (without reimbursement from the Collection Account or
otherwise) upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement or any Supplement (including the reasonable fees
and expenses of its agents and counsel) except any such expense, disbursement
or advance as may arise from its negligence or bad faith and except as provided
in the following sentence. If the Trustee is appointed Successor Servicer
pursuant to Section 10.2, the provisions of this Section 11.5 shall not apply
to expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Servicer.
The obligations of the Servicer and the Transferor under this Section
11.5, Section 7.4 and Section 8.4 shall survive the termination of the Trust
and the resignation or removal of the Trustee or the Servicer.
SECTION 11.6 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder
shall at all times be a national banking association, a banking corporation or
trust company organized and doing business under the laws of the United States
of America or any state thereof authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000, a rating as to its long-term unsecured debt obligations of at
least Baa3 by Moody's (if Moody's shall then be a Rating Agency) and BBB- by
Standard & Poor's (if Standard & Poor's shall then be a Rating Agency) and a
rating as to its short-term deposits or long-term unsecured debt obligations
that satisfies the rating requirement of any other applicable Rating Agency and
subject to supervision or examination by Federal or state authority. If such
banking corporation or national banking association publishes reports of
condition at least
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annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then for the purpose of this Section 11.6, the combined
capital and surplus of such corporation or national banking association shall
be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section 11.6,
the Trustee shall resign immediately in the manner and with the effect
specified in Section 11.7.
SECTION 11.7 RESIGNATION OR REMOVAL OF TRUSTEE.
(a) The Trustee may at any time resign as Trustee and be discharged from
the trust hereby created by giving written notice thereof to the Transferor and
the Servicer. Upon receiving such notice of resignation, the Transferor shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor trustee. If no successor trustee shall have been so
appointed and have accepted such appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.6, or becomes insolvent, and shall fail to
resign after written request therefor by the Transferor, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver or conservator of the Trustee or of its property shall
be appointed, or any public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of rehabilitation, conservation
or liquidation, then the Transferor may, but shall not be required to, remove
the Trustee and promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.7 shall
not become effective until acceptance of appointment by the successor trustee
as provided in Section 11.8. Any liability of the Trustee arising hereunder
shall survive such appointment of a successor trustee.
SECTION 11.8 SUCCESSOR TRUSTEE.
(a) Any successor trustee appointed as provided in Section 11.7 shall
execute, acknowledge and deliver to the Transferor and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder and under any Supplement, with like effect as if
originally named as Trustee herein. The predecessor Trustee shall,
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upon payment of its reasonable fees and expenses, deliver to the successor
trustee all documents held by it hereunder, and the Transferor and the
predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor trustee all such rights, powers, duties and
obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.8 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.6 hereof and shall be an
Eligible Servicer, and, the applicable Rating Agencies shall have consented to
such appointment.
(c) Upon acceptance of appointment by a successor trustee as provided in
this Section 11.8, such successor trustee shall mail notice of such succession
hereunder to each Rating Agency and all Certificateholders (other than Holders
of Bearer Certificates) at their addresses as shown in the Certificate
Register. Notice to Holders of Bearer Certificates shall be given by
publication in the manner described in Section 13.5 of the Agreement.
SECTION 11.9 MERGER OR CONSOLIDATION OF TRUSTEE. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.6 and shall be an Eligible Servicer, without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
SECTION 11.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provision of this Agreement or any
Supplement, at any time, for the purpose of meeting any legal requirements of
any jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee, or separate trustee, of all
or any part of the Trust, and to vest in such Person, in such capacity and for
the benefit of the Certificateholders, such title to the Trust, or any part
thereof, and, subject to the other provisions of this Section 11.10, such
powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
11.6 and no notice to Certificateholders of the appointment of any co-trustee
or separate trustee shall be required under Section 11.8.
(b) Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and
conditions:
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(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee
or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any
laws of any jurisdiction in which any particular act or acts are
to be performed (whether as Trustee hereunder or as successor to
the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder
appointed with due care; and
(iii) the Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement or any Supplement, specifically including every
provision of this Agreement or any Supplement relating to the conduct of,
affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any Supplement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 11.11 TAX RETURNS AND COMPLIANCE.
(a) In the event the Trust shall be required to file tax returns, the
Servicer shall prepare or cause to be prepared and is authorized hereunder to
sign any tax returns
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required to be filed by the Trust and, to the extent possible, shall file such
returns at least five (5) days before such returns are due to be filed. The
Servicer shall prepare or shall cause to be prepared all tax information
required by law to be distributed to Certificateholders and Certificate Owners
and shall deliver such information to the Paying Agent at least five (5) days
prior to the date it is required by law to be distributed to Certificateholders
and Certificate Owners. The Trustee shall, upon request, furnish the Servicer
with all such information known to the Trustee as may be reasonably required in
connection with the preparation of such tax returns and shall, upon request,
execute such tax returns. In no event shall the Trustee, the Paying Agent or
the Servicer be liable for any liabilities, costs or expenses of the Trust, the
Investor Certificateholders or the Certificate Owners arising under any tax
law, including without limitation, Federal, state, local or foreign income or
excise taxes or any other tax imposed on or measured by income (or any interest
or penalty with respect thereto or arising from a failure to comply therewith),
except to the extent that such tax is imposed as a result of a violation by
such Person of the provisions of this Agreement or any Supplement.
(b) The Trustee and each Paying Agent shall comply with all Federal
withholding requirements respecting payments to Investor Certificateholders or
persons receiving funds from the Trust. In the event the Trustee or Paying
Agent does withhold any amount from interest, principal, or other payments
pursuant to Federal withholding requirements, the Trustee or Paying Agent shall
indicate the amount withheld in writing with any payment to the person
otherwise entitled to such amount.
SECTION 11.12 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or any
Supplement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Certificateholders in respect of which such
judgment has been obtained.
SECTION 11.13 SUITS FOR ENFORCEMENT. If a Servicer Default shall occur
and be continuing, the Trustee, in its discretion, may, subject to the
provisions of Section 10.1, proceed to protect and enforce its rights and the
rights of the Certificateholders under this Agreement or any Supplement by such
suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this Agreement
or any Supplement or in aid of the execution of any power granted in this
Agreement or any Supplement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
SECTION 11.14 RIGHTS OF CERTIFICATEHOLDERS TO DIRECT TRUSTEE. Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the
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Aggregate Investor Amount of all Series affected by the conduct of any
proceeding or the exercise of any right conferred on the Trustee shall have the
right to direct the time, method, and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on the Trustee; provided, however, that, subject to Section 11.1, the Trustee
shall have the right to decline to follow any such direction if the Trustee, as
advised by counsel, determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determines that the proceedings so
directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Certificateholders of such Series not parties to
such direction or to the rights of Certificateholders of other Series; and
provided further that nothing in this Agreement or any Supplement shall impair
the right of the Trustee to take any action deemed proper by the Trustee and
which is not inconsistent with such direction.
SECTION 11.15 REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The Trustee
represents and warrants that:
(i) The Trustee is a national banking association,
organized, existing and in good standing under the federal banking
laws of the United States and is, and will remain for the term of
this Agreement, duly qualified and in good standing in the States
of Minnesota and New York;
(ii) The Trustee has full power, authority and right to
execute, deliver and perform this Agreement and any Supplement,
and has taken all necessary action to authorize the execution,
delivery and performance by it of this Agreement and any
Supplement; and
(iii) This Agreement and any Supplement has been, or will be
duly executed and delivered by the Trustee, and assuming due
execution and delivery by the other parties thereto constitutes a
legal, valid and binding obligation of the Trustee enforceable
against the Trustee in accordance with its terms.
SECTION 11.16 MAINTENANCE OF OFFICE OR AGENCY. For so long as any
Investor Certificates are held by Certificate Owners in Definitive
Certificates, the Trustee will maintain at its expense in the Borough of
Manhattan, The City of New York, an office or offices or agency or agencies
where notices and demands to or upon the Trustee in respect of the Certificates
and this Agreement may be served. The Trustee initially appoints The
Depository Trust Company, 55 Water Street, New York, New York 10004, Attention:
Norwest New York City as its agent for such purposes in New York. The Trustee
will give prompt written notice (or in the case of Holders of Bearer
Certificates, notice by publication in the manner described in Section 13.5 of
the Agreement) to the Servicer and to Certificateholders of any change in the
location of such Corporate Trust Office, or such other office or agency.
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ARTICLE XII
TERMINATION
SECTION 12.1 TERMINATION OF TRUST.
(a) The respective obligations and responsibilities of the
Transferor, the Servicer, the Paying Agent and the Trustee and their agents
hereunder created hereby (other than the obligation of the Trustee to make
payments to Certificateholders as hereafter set forth) shall terminate, except
with respect to the duties described in Sections 2.4(c), 7.4, 8.4, 11.5 and
12.3(b), upon the earliest of (i) the day designated by the Transferor after
the Distribution Date following the date on which funds shall have been
deposited in the Collection Account or applicable Principal Account sufficient
to pay the Aggregate Investor Amount and any Enhancement Investor Amount plus
applicable Certificate Interest accrued through such Distribution Date, and
(ii) the day on which the final payment of principal is made to the
Certificateholders, and all right, title and interest to the Receivables and
other funds of the Trust (other than funds held in the Principal Account) will
be transferred to the holder of the Exchangeable Transferor Certificate (the
"Final Termination Date"); provided, however, in no event shall the Trust
created by this Agreement continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of George Herbert Walker Bush,
former President of the United States of America, living on the date of this
Agreement. The Servicer shall promptly notify the Trustee of any prospective
termination pursuant to this Section 12.1.
(b) If on the last Distribution Date in the month immediately
preceding the month in which the Final Termination Date occurs (after giving
effect to all transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal on any Series of Certificates to be made on
such Distribution Date pursuant to Article IV), the Investor Amount or any
Enhancement Investor Amount of any Series would be greater than zero, the
Servicer shall sell within 30 days after such Distribution Date all of the
Receivables in a commercially reasonable manner and on commercially reasonable
terms which shall include the solicitation of competitive bids and shall
consummate the sale with the highest bidder for the Receivables. The
Transferor or any of its Affiliates shall be permitted to bid for the
Receivables. In addition, the Transferor or any Affiliate shall have the right
to match any bid by a third Person and be granted the right to purchase the
Receivables at such matched bid price. The proceeds of any such sale shall be
treated as Collections on the Receivables and shall be allocated in accordance
with Article IV; provided, however, that the Trustee shall determine
conclusively the amount of such proceeds which are allocable to Finance Charge
Receivables and the amount of such proceeds which are allocable to Principal
Receivables. Prior to such sale of Receivables, the Servicer shall continue to
collect Collections on the Receivables and allocate such payments in accordance
with the provisions of Article IV.
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SECTION 12.2 OPTIONAL PURCHASE; FINAL TERMINATION DATE OF INVESTOR
CERTIFICATES OF ANY SERIES.
(a) If provided in any Supplement with respect to a Series of Investor
Certificates (which provisions must refer specifically to this Section 12.2),
on any Distribution Date, the Transferor may, but shall not be obligated to,
purchase such Series by depositing into the Collection Account, prior to such
Distribution Date, an amount equal to the Investor Amount thereof plus interest
accrued and unpaid thereon at the applicable Certificate Rate through the
interest accrual period preceding such Distribution Date plus any other unpaid
amounts required to be paid pursuant to this Section 12.2 under any Supplement;
provided, however that, if the Transferor shall not have a rating of P-3 or
Baa3 or higher by Moody's, and A-3 or BBB- or higher by Standard & Poor's, no
such purchase of any Series of Investor Certificates shall occur unless the
Transferor shall deliver to the Trustee and the Rating Agencies an Opinion of
Counsel reasonably acceptable to the Trustee that such purchase of any Series
of Investor Certificates would not constitute a fraudulent conveyance. Nothing
herein limits the right of the Transferor or any Affiliate to purchase Investor
Certificates on the open market and submit them to the Trustee for
cancellation.
(b) The amount deposited pursuant to Section 12.2(a) shall be paid to the
Investor Certificateholders of the related Series pursuant to Article IV on the
Distribution Date following the date of such deposit. All Certificates of a
Series which are purchased by the Transferor pursuant to Section 12.2(a) shall
be delivered by the Transferor upon such purchase to, and be canceled by, the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferor.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Stated Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Investor Amount or any Enhancement Investor
Amount of any Series of Certificates is greater than zero on its Stated Series
Termination Date (after giving effect to all transfers, withdrawals, deposits
and drawings to occur on such date and the payment of principal to be made on
such Series on such date), the Trustee will sell or cause to be sold, and pay
the proceeds to all Certificateholders of such Series pro rata in final payment
of all principal of and accrued interest on such Series of Certificates, an
amount of Receivables or interests in Receivables up to 110% of the Adjusted
Investor Amount and any Enhancement Investor Amount of such Series at the close
of business on such date (but not more than an amount of Receivables equal to
the sum of (1) the product of (A) the Transferor Percentage, (B) the Aggregate
Principal Receivables and (C) a fraction the numerator of which is the related
Investor Percentage with respect to Finance Charge Receivables and the
denominator of which is the sum of all Investor Percentages with respect to
Finance Charge Receivables of all Series outstanding and (2) the Investor
Amount and any Enhancement Investor Amount of such Series). The Trustee shall
conduct the sale of Receivables in a commercially reasonable manner and on
commercially reasonable terms which shall include the solicitation of
competitive bids and shall consummate the sale with
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the highest bidder for the Receivables. The Transferor or any of its
Affiliates shall be permitted to bid for the Receivables. In addition, the
Transferor or any Affiliate shall have the right to match any bid by a third
Person and be granted the right to purchase the Receivables at such matched bid
price. Any proceeds of such sale in excess of the outstanding principal and
interest due to Certificateholders of the applicable Series (which shall be
paid to such Holders) shall be paid to the Holder of the Exchangeable
Transferor Certificate, unless the applicable Supplement shall provide
otherwise. Upon such Stated Series Termination Date with respect to the
applicable Series of Certificates, final payment of all amounts allocable to
any Investor Certificates of such Series shall be made in the manner provided
in Section 12.3.
SECTION 12.3 FINAL PAYMENT WITH RESPECT TO ANY SERIES.
(a) Written notice of any termination, specifying the Distribution Date
upon which the Investor Certificateholders of any Series may surrender their
Certificates for payment of the final distribution with respect to such Series
and cancellation, shall be given (subject to at least two (2) Business Days'
prior notice from the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution (or in the case of the Holders of Bearer
Certificates by the publication by the Trustee of a notice at least once in a
newspaper of general circulation in Luxembourg (which newspaper shall be
printed in the English language and customarily published on each business day
in Luxembourg) and, so long as the Investor Certificates are listed on the
Luxembourg Stock Exchange or other stock exchange and such exchange so
requires, in Luxembourg or the location required by such other stock exchange)
specifying (a) the Distribution Date (which shall be the Distribution Date in
the month in which the deposit is made pursuant to Section 2.4, 9.2, 10.2 or
12.2(a) or such other section as may be specified in the related Supplement)
upon which final payment of such Investor Certificates will be made upon
presentation and surrender of such Investor Certificates at the office or
offices therein designated, (which, in the case of Bearer Certificates, shall
be outside the United States), (b) the amount of any such final payment and (c)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Investor Certificates at the office or offices therein specified. The
Servicer's notice to the Trustee in accordance with the preceding sentence
shall be accompanied by an Officer's Certificate setting forth the information
specified in the applicable Supplement covering the period during the then
current calendar year through the date of such notice and setting forth the
date of such final distribution. The Trustee shall give such notice to the
Transfer Agent and Registrar and the Paying Agent at the time such notice is
given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to Section
12.1(a) or the occurrence of the Stated Series Termination Date with respect to
any Series, all funds then on deposit in the Collection Account shall continue
to be held in trust for the benefit of the Certificateholders and the Paying
Agent or the Trustee shall pay such funds to the Certificateholders upon
surrender of their Certificates (which surrenders and
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payments, in the case of Bearer Certificates, shall be made only outside the
United States). In the event that all of the Investor Certificateholders of
such Series shall not surrender their Certificates for cancellation within six
months after the date specified in the above-mentioned notice, the Trustee
shall give a second written notice (or in the case of Bearer Certificates,
publication notice) to the remaining Investor Certificateholders of such Series
upon receipt of the appropriate records from the Transfer Agent and Registrar
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one and one-half years after the
second notice all the Investor Certificates of such Series shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining Investor
Certificateholders of such Series concerning surrender of their Certificates,
and the cost thereof shall be paid out of the funds in the Collection Account
held for the benefit of such Investor Certificateholders. The Trustee shall
pay or cause to be paid to the Transferor upon request all monies held for the
payment of principal or interest which remain unclaimed after two years.
(c) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be mutilated and
physically canceled by the Transfer Agent and Registrar and be disposed of in a
manner satisfactory to the Trustee and the Transferor.
SECTION 12.4 TRANSFEROR'S TERMINATION RIGHTS. Upon the termination of the
Trust pursuant to Section 12.1 and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall return to the Transferor (without recourse,
representation or warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, and all monies due or
to become due with respect thereto, all proceeds thereof except for amounts
held by the Paying Agent pursuant to Section 12.3(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, and shall file and record UCC termination statements in all
Relevant UCC States as shall be reasonably requested by the Transferor to vest
in itself all right, title and interest which the Trust had in the applicable
Receivables.
SECTION 12.5 DEFEASANCE. Notwithstanding anything to the contrary in this
Agreement:
(a) The Transferor may at the Transferor's option be discharged from its
obligations hereunder with respect to any Series or all outstanding Series (the
"Defeased Series") on the date the applicable conditions set forth in
subsection 12.5(c) are satisfied (a "Defeasance"); provided, however, that the
following rights, obligations, powers, duties and immunities shall survive with
respect to the Defeased Series until otherwise terminated or discharged
hereunder: (i) the rights of the Holders of Investor Certificates of the
Defeased Series to receive, solely from the trust fund provided for in Section
12.5(c), payments in respect of principal of and interest on such Investor
Certificates when such payments are due; (ii) the right of any Enhancement
Provider to the repayment of any
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amount, including interest thereon, due to it under the applicable Enhancement
agreement and Supplement; (iii) the Transferor's obligations with respect to
such Certificates under Sections 6.3 and 6.4; (iv) the rights (including the
right to payment of its fees and expenses), powers, trusts, duties, and
immunities of the Trustee, the Paying Agent and the Transfer Agent and
Registrar hereunder; and (v) this Section 12.5.
(b) Subject to Section 12.5(c), the Transferor at its option may
cause Collections allocated to the Defeased Series and available to purchase
Principal Receivables to be applied to purchase Permitted Investments rather
than Principal Receivables.
(c) The following shall be the conditions to Defeasance under
Section 12.5(a):
(i) The Transferor irrevocably shall have deposited or
caused to be deposited with the Trustee (such deposit to be
made from other than the Transferor's funds), under the terms of
an irrevocable trust agreement in form and substance satisfactory
to the Trustee, as trust funds in trust for making the payments
described below, (A) U.S. Dollars in an amount, or (B) Permitted
Investments which through the scheduled payment of principal and
interest in respect thereof will provide, not later than the due
date of payment thereon, money in an amount, or (C) a combination
thereof, in each case sufficient to pay and discharge, and which
shall be applied by the Trustee to pay and discharge, all
remaining scheduled interest and principal payments on all
outstanding Investor Certificates of the Defeased Series on the
dates scheduled for such payments in this Agreement and the
applicable Supplements and all amounts owing to the Enhancement
Providers with respect to the Defeased Series;
(ii) prior to its exercise of its right pursuant to this
Section 12.5 with respect to a Defeased Series to substitute money
or Permitted Investments for Receivables, the Transferor shall
have delivered to the Trustee an Opinion of Counsel to the effect
that such deposit and termination of obligations will not have any
material adverse impact on the Federal income tax characterization
of any outstanding Series of Investor Certificates that have been
the subject of a previous opinion of tax counsel or result in the
Trust being taxable as an association for Federal or applicable
state income tax purposes and an Opinion of Counsel to the effect
that such deposit and termination of obligations will not result
in the Trust being required to register as an "investment company"
within the meaning of the 1940 Act;
(iii) the Transferor shall have delivered to the Trustee and
any Enhancement Provider an Officer's Certificate of the
Transferor stating
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the Transferor reasonably believes that such deposit and
termination of obligations will not, based on the facts known to
such officer at the time of such certification, then cause a Pay
Out Event with respect to any Series or any event that, with the
giving of notice or the lapse of time, would result in the
occurrence of a Pay Out Event with respect to any Series; and
(iv) the Rating Agency Condition shall have been satisfied.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 AMENDMENT.
(a) This Agreement and any Supplement may be amended from time to time by
the Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to cure any ambiguity, to revise certain exhibits
and schedules hereto, to correct or supplement any provisions herein which may
be inconsistent with any other provisions herein, to add other identifying code
numbers or identifying characteristics to the definition of Account or to add
any other provisions with respect to matters or questions raised under this
Agreement which shall not be inconsistent with the provisions of this
Agreement, including any matters arising under Section 2.5(d) necessary to
effect the conveyance contemplated thereunder and as otherwise permitted
herein; provided, however, that such action shall not adversely affect in any
material respect the interests of any of the Investor Certificateholders.
Additionally, this Agreement and any Supplement may be amended from time to
time by the Servicer, the Transferor and the Trustee, without the consent of
any of the Certificateholders, to add to, change or eliminate any of the
provisions of this Agreement to (i) enable Bearer Certificates to be issued in
conformity with the Bearer Rules, to provide that Bearer Certificates may be
registrable as to principal, to change or eliminate any restrictions on the
payment of principal of, premium, if any, or any interest on Bearer
Certificates to comply with the Bearer Rules, to permit Bearer Certificates to
be issued in exchange for Registered Certificates (if then permitted by the
Bearer Rules), to permit Bearer Certificates to be issued in exchange for
Bearer Certificates of other authorized denominations or to permit the issuance
of Certificates in uncertificated form, provided any such action shall not
adversely affect the interests of the Holders of Bearer Certificates of any
Series or any related Coupons in any material respect unless such amendment is
necessary to comply with the Bearer Rules, or any right of the Investor
Certificateholders hereunder, provided (ii) that (x) the Servicer shall have
furnished the Trustee with an Officer's Certificate to the effect that the
amendment will not materially and adversely affect the interests of any
Certificateholders thereunder, (y) such amendment will not cause the Trust to
be characterized as a corporation for Federal income tax purposes or otherwise
have a material adverse effect on the Federal income taxation of any Series and
(z) the Servicer shall have given each Rating Agency ten (10) Business Days'
prior written notice of such
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amendment and shall have received written confirmation from each Rating Agency
rating the affected Series that the Rating Agency Condition will be met. No such
amendment, however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth in Section 13.1(b), or (i) reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any Investor Certificates of any Series, (ii) change the
definition of or the manner of calculating the interest of any
Certificateholder, (iii) alter the requirements for changing the percentage by
which the Minimum Transferor Amount is determined, (iv) change the manner in
which the Transferor Amount is determined, or (v) reduce the percentage required
in Section 13.1(b) to consent to such amendment. Notwithstanding the foregoing,
any amendments providing for the transfer of Receivables to or by, and the
generation of new Receivables by, the Bank as Seller, Transferor or Eligible
Originator, the appointment of the Bank as Servicer, and/or the assignment of
this Agreement including any Supplement to ____________ in connection with such
transfer and any amendments to this Agreement necessary to reflect such Bank and
any related special purpose, bankruptcy remote entity that is an Affiliate of
the Company and that is organized for purposes of purchasing Accounts and
Receivables from such Bank and serving as Transferor, will be deemed not to
materially and adversely affect the interests of the Certificateholders.
Prior to executing any amendment in accordance with this Section
13.1(a), the Trustee shall receive and shall be permitted to rely upon an
Opinion of Counsel to the effect that the conditions and requirements of this
Section 13.1(a) have been satisfied (without implying that such a rating
confirmation is required to be obtained, such Opinion of Counsel may rely as to
any rated Series solely on a rating confirmation from the Rating Agencies that
such amendment shall not cause a reduction or withdrawal of the rating of any
outstanding Series of Certificates). The Transferor shall deliver prior written
notice of any amendment pursuant to this Section 13.1(a) to each Rating Agency.
(b) This Agreement and any Supplement may also be amended from time to
time by the Servicer, the Transferor and the Trustee with the consent of the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 50% of the Investor Amount of all Series adversely affected, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or modifying in any manner the rights of the
Investor Certificateholders of any Series then issued and outstanding; provided,
however, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, distributions which are required to be made on any Investor
Certificate of such Series without the consent of all holders of the related
Investor Certificates, (ii) change the definition of or the manner of
calculating the Investor Amount, the Investor Percentage, the required amount
under any Enhancement or the Investor Default Amount of such Series without the
consent of the related Investor Certificateholders or (iii) reduce the aforesaid
percentage required to consent to any such amendment, without the consent of all
holders of the related Investor Certificates of all Series adversely affected
thereby. Any amendment pursuant to this Section 13.1(b) shall require that each
Rating Agency rating the affected Series confirm that such amendment
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will not cause a reduction or withdrawal of the rating of any outstanding Series
of Certificates.
(c) Each Certificateholder, by acquiring an interest in a Certificate,
is deemed to consent to any amendment to this Agreement or any Supplement
necessary for the Transferor to elect FASIT status for the Trust or any portion
thereof under the Code, provided that such election may not be made unless the
Transferor delivers to the Trustee an Opinion of Counsel to the effect that (i)
the issuance of FASIT regular interests will not adversely affect the tax
characterization as debt of Certificates of any outstanding Series or Class with
respect to which an Opinion of Counsel was delivered at the time of their
issuance that such Certificates would be characterized as debt, (ii) following
such issuance, the Trust will not be classified for Federal income tax purposes
as an association (or publicly traded partnership) taxable as a corporation and
(iii) such issuance will not cause or constitute an event in which gain or loss
would be recognized for federal income tax consequences by any
Certificateholder.
(d) Promptly after the execution of any such amendment other than an
amendment pursuant to Section 13.1(a), the Trustee shall furnish written
notification (or in the case of Bearer Certificates, publication notice in the
manner described in Section 13.5) of the substance of such amendment to each
Investor Certificateholder, and the Servicer shall furnish written notification
of the substance of such amendment to any related Enhancement Provider and each
Rating Agency.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such Certificateholders shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(f) Any Assignment or Reassignment regarding the addition to or removal
of Receivables from the Trust respectively, as provided in Sections 2.6 and 2.7,
respectively, executed in accordance with the provisions hereof shall not be
considered amendments to this Agreement, including, without limitation, for the
purpose of Sections 13.1(a), (b),(c) and (g).
(g) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel
substantially in the form of Part Two of Exhibit G. The Trustee may, but shall
not be obligated to, enter into any such amendment which affects the Trustee's
own rights, duties or immunities under this Agreement or otherwise.
(h) Notwithstanding anything in this Section 13.1 to the contrary, any
Supplement may be amended on the terms and in accordance with the procedures
specified therein.
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SECTION 13.2 PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST.
(a) The Servicer shall cause this Agreement, any Supplement, all
amendments hereto and/or all financing statements, amendments and continuation
statements and any other necessary documents covering the right, title and
interest of the Trust in the property conveyed hereunder to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Trustee hereunder
to all property comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Transferor shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this Section
13.2(a).
(b) Within 30 days after the Transferor makes any change in its name,
identity or corporate structure which would make any financing statement,
amendment or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402(7) of the UCC as in
effect in the Relevant UCC State, the Transferor shall give the Trustee notice
of any such change and shall file such financing statements or amendments as may
be necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof.
(c) The Transferor and the Servicer will give the Trustee prompt
written notice of any relocation of any office from which the Servicer services
Receivables or keeps records concerning the Receivables or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements, continuation statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof notwithstanding
any relocation of any office from which the Servicer services Receivables or
keeps records concerning the Receivables or of its principal executive office.
The Servicer will at all times maintain each office from which it services
Receivables, and the Transferor and the Servicer will at all times maintain
their respective principal executive offices, within the United States of
America.
(d) The Servicer will deliver to the Trustee and each Rating Agency:
(i) upon each date that any Additional Accounts are to be included in the
Accounts pursuant to Section 2.6 (other than Section 2.6(d)), an Opinion of
Counsel substantially in the form of Part One of Exhibit G; and (ii) on or
before June 30 of each year, beginning with June 30, 1998, an Opinion of
Counsel, dated as of a date within 90 days of such day, substantially in the
form of Exhibit H.
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SECTION 13.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
(a) The death or incapacity of any Investor Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
(b) No Investor Certificateholder shall have any right to vote (except
as provided herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
(c) No Investor Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given notice to the Trustee, and unless
the Holders of Certificates evidencing Undivided Interests aggregating more than
662/3% of the Investor Amount of any Series which may be adversely affected but
for the institution of such suit, action or proceeding shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Certificateholders shall
have the right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Certificateholders of any other of the Certificates, or to
obtain or seek to obtain priority over or preference to any other such
Certificateholder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 13.3, each and every Certificateholder and the Trustee shall be entitled
to such relief as can be given either at law or in equity. Each Certificate
Owner by its acquisition of a Book Entry Certificate shall be deemed to have
consented to the provisions of this Section 13.3.
SECTION 13.4 GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 13.5 NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if sent by
facsimile transmission to, sent by courier to or mailed by registered mail,
return receipt
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requested, to (a) in the case of the Transferor and the Servicer, 3455 Highway
80 West, Jackson, Mississippi 39209, Attention: Chief Financial Officer,
facsimile number (205) 940-4908, telephone number (205) 940-4000, (b) in the
case of the Trustee, Norwest Bank Minnesota, N.A., Norwest Center, Sixth and
Marquette, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services -- Asset-Backed Administration and (c) as to such other parties to
which notices hereunder or under any Supplement are required to be given
pursuant to the terms of any Supplement, the addresses specified in any
Supplement or, as to each party, such other address as shall be designated by
such party in a written notice to each other party. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Certificateholder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder receives such notice.
Any notice required or permitted to be made to Holders of Bearer
Certificates by publication shall be published in an Authorized Newspaper and,
if the Certificates of such Series are then listed on the Luxembourg Stock
Exchange and such stock exchange shall so require, in a newspaper of general
circulation in Luxembourg (which newspaper shall be printed in the English
language and customarily published on each business day in Luxembourg) and, if
the Certificates of such Series are listed on any other stock exchange and such
stock exchange shall so require, in any other city required by such stock
exchange outside the United States, or, if not practicable, elsewhere in Europe.
In case by reason of the suspension of publication of any Authorized
Newspaper or permitted newspaper with respect to Luxembourg or by reason of any
other cause it shall be impracticable to publish any notice to Holders of Bearer
Certificates as provided above, then such notification to Holders of Bearer
Certificates as shall be given with approval of the Trustee shall constitute
sufficient notice to such Holders for every purpose hereunder. Neither the
failure to give notice by publication to Holders of Bearer Certificates as
provided above, nor any defect in any notice so published, shall affect the
sufficiency of any notice mailed to Holders of Registered Certificates as
provided above.
Copies of all notices, reports, certificates and amendments delivered
hereunder shall be mailed to the Rating Agency as follows: Moody's Investors
Service, Inc., 99 Church Street, New York, NY 10007, Attention: ABS Monitoring
Department - 4th Floor; and to Standard & Poor's Ratings Services, 25 Broadway,
New York, NY 10004, Attention: Asset Backed Surveillance Department.
SECTION 13.6 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
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SECTION 13.7 ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.2, 8.2, 8.5 and 13.2(b), this
Agreement, including any Supplement, may not be assigned by the Transferor or
the Servicer, as the case may be, without the prior consent of Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Aggregate Investor Amount.
SECTION 13.8 CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the
intention of the parties to this Agreement that the Investor Certificateholders
(and the Certificate Owners) shall not be personally liable for obligations of
the Trust, that the Undivided Interests represented by the Investor Certificates
shall be nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and that Investor Certificates upon authentication thereof by the
Trustee pursuant to Section 6.2 are and shall be deemed fully paid.
SECTION 13.9 FURTHER ASSURANCES. The Transferor and the Servicer agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of this Agreement including, without limitation,
the execution of any financing statements or continuation statements relating to
the property of the Trust for filing under the provisions of the UCC of each
Relevant UCC State.
SECTION 13.10 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 13.11 COUNTERPARTS. This Agreement and any Supplement may be
executed in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
SECTION 13.12 NO THIRD-PARTY BENEFICIARIES. This Agreement and any
Supplement will inure to the benefit of and be binding upon the parties hereto,
the Certificateholders and the Certificate Owners and their respective
successors and permitted assigns. Except as otherwise provided in this Agreement
or any Supplement, no other person will have any right or obligation hereunder,
whether as third party beneficiaries or otherwise.
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SECTION 13.13 ACTIONS BY CERTIFICATEHOLDERS.
(a) Wherever in this Agreement or any Supplement, a provision is made
that an action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder of any Series, unless such provision requires a
specific percentage of Investor Certificateholders of a certain Series or all
Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
SECTION 13.14 MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement, including any Supplements, set forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 13.15 HEADINGS. The cover page, titles, table of contents,
headings and subheadings of this Agreement are for purposes of reference only
and shall not otherwise affect the meaning or interpretation of any provision
hereof.
SECTION 13.16 CERTIFICATES AND OPINIONS OF COUNSEL.
(a) Any certificate delivered hereunder may be based, insofar as it
relates to legal matters, upon an Opinion of Counsel, unless the Person
delivering such certificate knows, or in the exercise of reasonable care should
know, that such opinion with respect to the matters upon which such certificate
may be based as aforesaid is erroneous. Any Opinion of Counsel or certificate
delivered hereunder may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer or the Transferor, stating that the information with respect to
such factual matters is in the possession of such Person, unless the Person
delivering such certificate or such counsel knows, or in the exercise of
reasonable care should know, that such certificate, opinion or representations
with respect to such matters are erroneous. Any Opinion of Counsel delivered
hereunder may contain necessary exceptions and qualifications.
(b) Any Opinion of Counsel or certificate delivered hereunder may be
based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by an independent public accountant or firm of
accountants, unless such counsel or the Person delivering such certificate, as
the case may be, knows that the certificate or opinions or representations with
respect to the accounting matters upon which the certificate or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous. Any certificate, opinion or
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representations of any firm of independent public accountants filed with the
Trustee shall contain a statement that such firm is independent.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments hereunder, they may, but need not, be consolidated and form one
instrument.
SECTION 13.17 NO PETITION COVENANT. Notwithstanding any prior
termination of this Agreement, the Transferor, the Servicer, the Trustee, the
Transfer Agent and Registrar and each Paying Agent shall not, prior to the date
which is one year and one day after the termination of this Agreement with
respect to the Trust, acquiesce, petition or otherwise invoke or cause the Trust
to invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Trust under any Federal or state
Debtor Relief Laws the appointment of a receiver, liquidator, conservator,
assignee, trustee, custodian, sequestrator or other similar official for the
Trust or any substantial part of its property or ordering the winding-up or
liquidation of the affairs of the Trust.
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IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee and
Paying Agent have caused this Master Pooling and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
------------------------------------
Name:
Title:
PROFFITT'S, INC.,
as Servicer
By
-------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and Paying Agent
By:
------------------------------------
Name:
Title:
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EXHIBIT A
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE
<PAGE> 118
EXHIBIT A
TO THE
MASTER POOLING AND SERVICING AGREEMENT
EXCHANGEABLE TRANSFEROR
CERTIFICATE
THIS CERTIFICATE OR ANY INTEREST HEREIN MAY NOT BE TRANSFERRED, ASSIGNED,
EXCHANGED OR CONVEYED, EXCEPT IN ACCORDANCE WITH SECTIONS 6.3, 6.9 AND 7.2 OF
THE MASTER POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
No. R-1 One Unit
PROFFITT'S CREDIT CARD MASTER TRUST
EXCHANGEABLE TRANSFEROR CERTIFICATE
This Certificate represents an interest in
the Proffitt's Credit Card Master Trust
Evidencing an undivided interest in a trust, the corpus of which
consists of receivables generated or to be generated in a portfolio of consumer
revolving credit card accounts including, without limitation, VISA(R) Card and
MasterCard(R) credit card accounts, originated or acquired by the Sellers or
their Affiliates, including the Bank.
(Not an interest in or recourse obligation of Proffitt's, Inc. or any
of its Affiliates)
This certifies that Proffitt's, Inc. is the registered owner of an
undivided interest in the Proffitt's Credit Card Master Trust (the "Trust")
issued pursuant to the Master Pooling and Servicing Agreement, dated as of July
__, 1997 (together with each Supplement, and as such Agreement may have been, or
may from time to time be, amended, supplemented or otherwise modified, the
"Pooling and Servicing Agreement"); by and among Proffitt's Credit Corporation,
as Transferor (in such capacity, the "Transferor"), Proffitt's, Inc., as
Servicer (in such capacity, the "Servicer"), and Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee"). The corpus of the Trust
consists of all of the Transferor's right, title and interest in and to a
portfolio of receivables now existing and hereafter created (the "Receivables")
arising under certain consumer revolving credit card accounts from time to time
owned by the Transferor and identified in the Pooling and Servicing Agreement
(collectively, the "Accounts"), all monies due or to become due with respect
thereto (including Recoveries) on and after the Cut-Off Date, all proceeds of
such Receivables, all Interchange, if any, all monies as are from time to time
deposited in the Collection Account and any other account or accounts maintained
for the benefit of the Certificateholders and all monies as are from time to
time available under the Enhancement, if any, for any Series for payment to
Certificateholders. The Receivables consist of Receivables which arise generally
from the purchase of merchandise and
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services, periodic finance charges, cash advances and cash advance fees, annual
cardholder fees, late fees, over limit fees, returned check fees, service
contract charges and Insurance Charges billed to Obligors, as more fully
specified in the Pooling and Servicing Agreement, including Recoveries on
Receivables in Defaulted Accounts.
Although a summary of certain provisions of the Pooling and Servicing
Agreement is set forth below, this Certificate does not purport to summarize the
Pooling and Servicing Agreement and reference is made to the Pooling and
Servicing Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds, and duties evidenced hereby and the rights,
duties and obligations of the Trustee. A copy of the Pooling and Servicing
Agreement may be requested from the Trustee by writing to the Trustee at Norwest
Bank Minnesota, National Association, Sixth and Marquette, Minneapolis,
Minnesota 55479-0070, Attention: Asset Backed Securities Corporate Trust
Department. To the extent not defined herein capitalized terms used herein have
the meanings ascribed to them in the Pooling and Servicing Agreement.
This Certificate is the Exchangeable Transferor Certificate, which
represents a fractional undivided interest in the Trust, including the right to
receive the Collections and other amounts at the times and in the amounts
specified in the Pooling and Servicing Agreement to be paid to the holder of the
Exchangeable Transferor Certificate. This Certificate is issued under and is
subject to the terms, provisions and conditions of the Pooling and Servicing
Agreement, to which Pooling and Servicing Agreement, as amended from time to
time, to which the holder hereof assents by its acceptance hereof, and by which
the holder hereof is bound.
This Exchangeable Transferor Certificate represents the Transferor
Interest in the Receivables in the Trust at any time. In addition to the
Exchangeable Transferor Certificate, Investor Certificates will be issued to
investors pursuant to the Pooling and Servicing Agreement, which will represent
the interests of Investor Certificateholders in the Trust. This Certificate
shall not represent any interest in the Collection Account or any other account
or any Enhancement, except as specifically provided in the Pooling and Servicing
Agreement.
The Transferor has entered into the Pooling and Servicing Agreement,
and this Certificate is issued, with the intention that, for federal, state and
local income and franchise tax purposes, the Investor Certificates (other than
those held by the Transferor or as otherwise provided in the applicable
Supplement) will qualify as indebtedness secured by the Receivables. The
Transferor, by entering into the Pooling and Servicing Agreement and by the
acceptance of the Exchangeable Transferor Certificate, agrees to treat the
Investor Certificates (other than those held by the Transferor or as otherwise
provided in the applicable Supplement) for federal, state and local income and
franchise tax purposes as indebtedness.
Subject to certain conditions in the Pooling and Servicing Agreement,
the obligations created by the Pooling and Servicing Agreement and the Trust
created thereby
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shall terminate upon the earlier of (i) the day designated by the Transferor
after the Distribution Date following the date on which funds shall have been
deposited in the Collection Account or applicable Principal Account sufficient
to pay the Aggregate Investor Amount and Enhancement Investor Amount plus
applicable Certificate Interest accrued through such Distribution Date, and (ii)
the day on which the final payment of principal is made to the
Certificateholders, and all right, title and interest to the Receivables and
other funds of the Trust (other than funds held in the Principal Account) are
transferred to the holder hereof.
Upon the termination of the Trust pursuant to Article XII of the
Pooling and Servicing Agreement and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall assign and convey to the Transferor (without
recourse, representation or warranty) all right, title and interest of the
Trustee in and to the Receivables, whether then existing or thereafter created,
and all proceeds thereof except for amounts held by the Paying Agent and all
other Trust property. The Trustee shall execute and deliver such instruments of
transfer and assignment, in each case without recourse, as shall be reasonably
requested by the Transferor to vest in the Transferor all right, title and
interest which the Trustee had in the applicable Receivables and other Trust
property.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual signature, the holder of this Certificate
shall not be entitled to any benefit under the Pooling and Servicing Agreement,
or be valid for any purpose.
IN WITNESS WHEREOF, Proffitt's, Inc. has caused this Exchangeable
Transferor Certificate to be duly executed under its official seal.
PROFFITT'S, INC.
By:
---------------------
Authorized Signatory
Dated: , 1997
------------
A-3
<PAGE> 121
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Exchangeable Transferor Certificate referred to in the
within-mentioned Pooling and Servicing Agreement.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:
----------------------------------------
Authorized Signatory
Dated: , 1997
--------------
A-4
<PAGE> 122
EXHIBIT B
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
<PAGE> 123
EXHIBIT B
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF ASSIGNMENT OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Subsection 2.6(c)(ii) of the
Master Pooling and Servicing Agreement)
ASSIGNMENT No. _________ OF RECEIVABLES IN ADDITIONAL ACCOUNTS, dated
as of _________________, _____, is from Proffitt's Credit Corporation, a Nevada
corporation (the "Transferor"), to Norwest Bank Minnesota, National Association,
as trustee (the "Trustee") pursuant to the Master Pooling and Servicing
Agreement referred to below.
WITNESSETH:
WHEREAS, Proffitt's Credit Corporation, as Transferor, Proffitt's,
Inc., as Servicer, and the Trustee are parties to the Master Pooling and
Servicing Agreement, dated as of July __, 1997, including any Supplement thereto
(hereinafter as such Agreement may have been, or may from time to time be,
amended, supplemented or otherwise modified, the "Pooling and Servicing
Agreement"); and
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to designate Additional Accounts to be included as Accounts
and to convey the Receivables of such Additional Accounts, whether now existing
or hereafter created, to the Trust as part of the corpus of the Trust (as each
such term is defined in the Pooling and Servicing Agreement); and
WHEREAS, the Trustee is willing to accept such designation and
conveyance subject to the terms and conditions hereof;
NOW THEREFORE, the Transferor and the Trustee hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Pooling and
Servicing Agreement.
"Additional Account Closing Date" shall mean, with respect to the
Additional Accounts designated hereby, ___________, ____.
"Additional Account Cut-Off Date" shall mean, with respect to the
Additional Accounts designated hereby, _________, _____.
B-1
<PAGE> 124
2. DESIGNATION OF ADDITIONAL ACCOUNTS. The Transferor shall deliver to
the Trustee on or prior to the Additional Account Closing Date, a computer file,
microfiche or written list containing a true and complete list of all Accounts
which as of the Additional Account Closing Date shall be deemed to be Additional
Accounts, identified by account number and by the Receivables balance in such
Accounts as of the close of business on the Additional Account Cut-Off Date.
Such list shall be marked as Schedule 1 to this Assignment and, as of the
Additional Account Closing Date, shall be incorporated into and made a part of
this Assignment and the Pooling and Servicing Agreement.
3. CONVEYANCE OF RECEIVABLES. (a) The Transferor does hereby transfer,
assign, set-over and otherwise convey to the Trust for the benefit of the
Certificateholders, without recourse, on and after the Additional Account
Closing Date, all right, title and interest of the Transferor in and to the
Receivables, now existing and hereafter created, in the Additional Accounts
designated on Schedule 1, all monies due or to become due on and after the
Additional Account Cut-Off Date and all amounts received with respect thereto,
including all Finance Charges, Recoveries and Interchange, if any, related
thereto, and all proceeds thereof (including Insurance Proceeds).
(b) In connection with such transfer, the Transferor agrees to
record and file, at its own expense, financing statements (and assignment and
continuation statements with respect to such financing statements when
applicable) with respect to the Receivables now existing and hereafter created
in the Additional Accounts designated on Schedule 1 (which may be a single
financing statement with respect to all such Receivables) for the transfer of
chattel paper, accounts and general intangibles (if necessary) as defined in
Section 9-106 of the UCC as in effect in the Relevant UCC State meeting the
requirements of applicable State law in such manner and such jurisdictions as
are necessary to perfect the assignment of such Receivables to the Trust, and to
deliver to the Trustee a file-stamped copy of such financing statement or other
evidence that such filing (which may, for purposes of this Section 3, consist of
telephone confirmation of such filing, confirmed within 24 hours in writing) to
the Trustee on or prior to the Additional Account Closing Date.
(c) In connection with such transfer, the Transferor further agrees,
at its own expense, on or prior to the Additional Account Closing Date, to cause
the Servicer to indicate, or cause to be indicated, clearly and unambiguously in
the computer files of the Transferor and the Sellers that the Receivables
created in connection with the Additional Accounts designated hereby have been
sold and transferred to the Trust pursuant to this Assignment for the benefit of
the Certificateholders.
4. ACCEPTANCE BY TRUSTEE. Subject to the satisfaction of the conditions
set forth in Section 6 of this Assignment, the Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest previously
held by the Transferor in and to the Receivables now existing and hereafter
created, and declares that it shall maintain such right, title and interest,
upon the trust herein set forth, for the benefit of all
B-2
<PAGE> 125
Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Assignment, the
Transferor delivered to the Trustee the computer file, microfiche or written
list described in Section 2 of this Assignment.
5. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The Transferor
hereby represents and warrants to the Trust as of the Additional Account Closing
Date that:
(A) LEGAL, VALID AND BINDING OBLIGATION. This Assignment constitutes
a legal, valid and binding obligation of the Transferor enforceable against the
Transferor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and creditors of
national banking associations and except as such enforceability may be limited
by general principles of equity (whether considered in a proceeding at law or in
equity).
(B) ELIGIBILITY OF ACCOUNTS. Each Additional Account designated
hereby was, as of the Additional Account Cut-Off Date, an Eligible Account.
(C) SELECTION PROCEDURES. No selection procedures believed by the
Transferor to be materially adverse to the interests of any Series of Investor
Certificates or any Enhancement Provider, if any, were utilized in selecting the
Additional Accounts designated hereby from the available Eligible Accounts in
the Transferor's portfolio of credit card accounts.
(D) INSOLVENCY. The Transferor is not insolvent and, immediately
after giving effect to the conveyance set forth in Section 3 of this Assignment,
will not be made insolvent by the transfer of the Receivables of such Additional
Accounts.
(E) SECURITY INTEREST. This Assignment constitutes either (i) a
valid transfer and assignment to the Trust of all right, title and interest of
the Transferor in and to Receivables now existing and hereafter created in
Additional Accounts designated on Schedule 1 hereto, all monies due or to become
due with respect thereto on and after the Additional Account Cut-Off Date
including all Finance Charges Recoveries, Interchange, if any, amounts held in
any of the accounts established for the benefit of Certificateholders on and
after the Additional Account Cut-Off Date and all proceeds of all Receivables to
the extent set forth in Section 9-306 of the UCC in effect in the Relevant UCC
State of such Receivables, and such Receivables and all proceeds thereof
(including Insurance Proceeds) will be conveyed to the Trust free and clear of
any Lien of any Person claiming through or under the Transferor or any of its
Affiliates except for (x) Liens permitted under subsection 2.5(b) of the Pooling
and Servicing Agreement, (y) the interest of the Transferor as holder of the
Exchangeable Transferor Certificate and (z) any right of the holder of the
Exchangeable Transferor Certificate to receive interest accruing on, and
investment earnings (net of investment losses and expenses) with respect to, the
Collection
B-3
<PAGE> 126
Account and any other account or accounts maintained for the benefit of
Certificateholders as provided in the Pooling and Servicing Agreement and any
Supplement; or (ii) a grant of a security interest (as defined in the UCC as in
effect in the Relevant UCC State) in such property to the Trustee on behalf of
the Trust, which is enforceable with respect to the existing Receivables of the
Additional Accounts designated on Schedule 1 hereto, and the proceeds thereof
(as defined in the UCC as in effect in the Relevant UCC State) (to the extent
set forth in Section 9-306 of the UCC as in effect in the Relevant UCC State),
upon the conveyance of such Receivables to the Trust, and which will be
enforceable with respect to the Receivables thereafter created in respect of
Additional Accounts designated on Schedule 1 hereto and the proceeds thereof (to
the extent set forth in Section 9-306 of the UCC as in effect in the Relevant
UCC State), upon such creation; and (iii) if this Assignment constitutes the
grant of a security interest to the Trust in such property, upon the filing of
the applicable financing statements described in Section 3 of this Assignment
with respect to the Additional Accounts designated hereby and in the case of the
Receivables of such Additional Accounts thereafter created and the proceeds
thereof (to the extent set forth in Section 9-306 of the UCC as in effect in the
Relevant UCC State), upon such creation, the Trust shall have a first priority
perfected security interest in such property and the proceeds thereof (to the
extent set forth in Section 9-306 of the UCC as in effect in the Relevant UCC
State), except for Liens permitted under subsection 2.5(b) of the Pooling and
Servicing Agreement.
6. CONDITIONS PRECEDENT. The acceptance of the Trustee set forth in
Section 4 of this Assignment and the amendment of the Pooling and Servicing
Agreement set forth in Section 7 hereof are subject to the satisfaction, on or
prior to the Additional Account Closing Date, of the following conditions
precedent:
(A) OFFICER'S CERTIFICATE. The Transferor shall have delivered to
the Trustee an Officer's Certificate dated as of the Additional Account Closing
Date, certifying that (i) all requirements set forth in Section 2.6 of the
Pooling and Servicing Agreement for designating Additional Accounts and
conveying the Receivables of such Additional Accounts, whether now existing or
hereafter created, have been satisfied, and (ii) each of the representations and
warranties made by the Transferor in Section 5 of this Assignment is true and
correct as of the Additional Account Closing Date. The Trustee may conclusively
rely on such Officer's Certificate, shall have no duty to make inquiries with
regard to the matters set forth therein, and shall incur no liability in so
relying.
(B) OPINION OF COUNSEL. The Transferor shall have delivered to the
Trustee and each Rating Agency an Opinion of Counsel with respect to the
Receivables in the Additional Accounts designated hereby substantially in the
form of Part One of Exhibit G to the Pooling and Servicing Agreement.
7. AMENDMENT OF THE POOLING AND SERVICING AGREEMENT. The Pooling and
Servicing Agreement is hereby amended to provide that all references therein to
the "Pooling and Servicing Agreement," to "this Agreement" and "herein" shall be
deemed from and after the Additional Account Closing Date to be a dual reference
to the Pooling
B-4
<PAGE> 127
and Servicing Agreement as amended by this Assignment. Except as expressly
amended hereby, all of the representations, warranties, terms, covenants and
conditions of the Pooling and Servicing Agreement shall remain unamended and
shall continue to be, and shall remain, in full force and effect in accordance
with its terms and except as expressly provided herein shall not constitute or
be deemed to constitute a waiver of compliance with or a consent to
non-compliance with any term or provision of the Pooling and Servicing
Agreement.
8. COUNTERPARTS. This Assignment may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the undersigned have caused this Assignment of
Receivables in Additional Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.
PROFFITT'S CREDIT CORPORATION,
as Transferor of the Additional Accounts
By
---------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and Paying Agent
By
---------------------------------------
Name:
Title:
B-5
<PAGE> 128
SCHEDULE 1
TO
ASSIGNMENT NO. ___
OF
RECEIVABLES
in
ADDITIONAL ACCOUNTS
B-6
<PAGE> 129
EXHIBIT C
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF REASSIGNMENT OF RECEIVABLES
<PAGE> 130
EXHIBIT C
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF REASSIGNMENT OF RECEIVABLES
(As required by Section 2.7(b)(i)of the
Master Pooling and Servicing Agreement)
THIS REASSIGNMENT No. ___ OF RECEIVABLES, dated as of _________, ____,
is by and between Proffitt's Credit Corporation, a Nevada corporation, and
Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"),
pursuant to the Master Pooling and Servicing Agreement referred to below.
WITNESSETH:
WHEREAS, Proffitt's Credit Corporation, as transferor (the
"Transferor"), Proffitt's, Inc., a Tennessee corporation, as servicer (the
"Servicer"), and the Trustee are parties to the Master Pooling and Servicing
Agreement, dated as of July ___, 1997, including any Supplement (hereinafter as
such Agreement may have been, or may from time to time be, amended, supplemented
or otherwise modified, the "Pooling and Servicing Agreement"); and
WHEREAS, pursuant to the Pooling and Servicing Agreement, the
Transferor wishes to remove all Receivables from certain designated Accounts
(the "Removed Accounts") and to cause the Trustee to quitclaim the Receivables
of such Removed Accounts, whether now existing or hereafter created, from the
Trust to the Transferor (as each such term is defined in the Pooling and
Servicing Agreement); and
WHEREAS, the Trustee is willing to accept such designation and to
quitclaim the Receivables in the Removed Accounts subject to the terms and
conditions hereof;
NOW THEREFORE, the Transferor and the Trustee hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings ascribed to them in the Pooling and
Servicing Agreement.
"Removal Date" shall mean, with respect to the Removed Accounts
designated hereby, ___________, ____.
"Removal Notice Date" shall mean, with respect to the Removed Accounts
designated hereby, __________, ____ (which shall be the tenth Business Day prior
to the Removal Date).
C-1
<PAGE> 131
2. DESIGNATION OF REMOVED ACCOUNTS. The Transferor shall deliver to the
Trustee herewith, a computer file, microfiche or written list containing a true
and complete list of each Account which as of the Removal Date shall be deemed
to be a Removed Account, such Accounts being identified by account number and by
the aggregate balance of the Receivables in such Removed Accounts as of the
Removal Notice Date. Such list shall be marked as Schedule 1 to this
Reassignment and shall be incorporated into and made a part of this Reassignment
and the Pooling and Servicing Agreement as of the Removal Date.
3. CONVEYANCE OF RECEIVABLES. The Trustee does hereby quitclaim to the
Transferor, without recourse, representation or warranty on and after the
Removal Date, all right, title and interest of the Trust in and to the
Receivables now existing and hereafter created in the Removed Accounts
designated on Schedule 1 hereto, all monies due or to become due and all amounts
received with respect thereto, including all Recoveries, Finance Charges,
Interchange, if any, Insurance Charges and service contract charges related
thereto, and all proceeds thereof.
(a) In connection with such transfer, the Trustee agrees to execute
and deliver to the Transferor on or prior to the date of this Reassignment, a
termination statement with respect to the Receivables now existing and hereafter
created in the Removed Accounts designated hereby (which may be a single
termination statement with respect to all such Receivables) evidencing the
release by the Trust of its lien on the Receivables in the Removed Accounts, and
meeting the requirements of applicable state law, in such manner and such
jurisdictions as are necessary to remove such lien. The Transferor shall be
responsible for filing any such termination statement and the Trustee shall have
no responsibility to see to any recording or filing of any such termination
statement.
4. ACCEPTANCE BY TRUSTEE. The Trustee hereby acknowledges that, prior
to or simultaneously with the execution and delivery of this Reassignment, the
Transferor delivered to the Trustee the computer file, microfiche or written
list represented by the Transferor to be as described in Section 2 of this
Reassignment.
5. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The Transferor
hereby represents and warrants to the Trust as of the Removal Date:
(A) VALID AND LEGALLY BINDING OBLIGATION. This Reassignment
constitutes a valid and legally binding obligation of the Transferor enforceable
against the Transferor in accordance with its terms, subject to bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of creditors'
rights in general, including creditors of national banking associations and
except as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity); and
C-2
<PAGE> 132
(B) SELECTION PROCEDURES. No selection procedures believed by the
Transferor to be materially adverse to the interests of any outstanding Series
of Investor Certificates were utilized in selecting the Removed Accounts
designated hereby.
6. CONDITIONS PRECEDENT. The amendment of the Pooling and Servicing
Agreement set forth in Section 7 hereof is subject to the satisfaction, on or
prior to the Removal Date, of the following condition precedent:
(A) OFFICER'S CERTIFICATE. The Transferor shall have delivered to
the Trustee (with a copy to the Rating Agencies), an Officer's Certificate
certifying that (i) on the Removal Date, all requirements set forth in Section
2.7(b) of the Pooling and Servicing Agreement for designating Removed Accounts
and reconveying the Receivables of such Removed Account as provided herein,
whether now existing or hereafter created, have been satisfied, and (ii) each of
the representations and warranties made by the Transferor in Section 5 hereof is
true and correct as of the Removal Date. The Trustee may conclusively rely on
such Officer's Certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so relying.
7. AMENDMENT OF THE POOLING AND SERVICING AGREEMENT. The Pooling and
Servicing Agreement is hereby amended to provide that all references therein to
the "Pooling and Servicing Agreement," to "this Agreement" and "herein" shall be
deemed from and after the Removal Date to be a dual reference to the Pooling and
Servicing Agreement as amended by this Reassignment. Except as expressly amended
hereby, all of the representations, warranties, terms, covenants and conditions
of the Pooling and Servicing Agreement shall remain unamended and shall continue
to be, and shall remain, in full force and effect in accordance with its terms,
and except as expressly provided herein, shall not constitute or be deemed to
constitute a waiver of compliance with or a consent to non-compliance with any
term or provision of the Pooling and Servicing Agreement.
8. COUNTERPARTS. This Reassignment may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
C-3
<PAGE> 133
IN WITNESS WHEREOF, the undersigned have caused this Reassignment of
Receivables to be duly executed and delivered by their respective duly
authorized officers on the day and year first above written.
PROFFITT'S CREDIT CORPORATION
as Transferor of the Additional Accounts
By
--------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and Paying Agent
By
--------------------------------------
Name:
Title:
C-4
<PAGE> 134
SCHEDULE 1
TO
REASSIGNMENT OF RECEIVABLES
REMOVED ACCOUNTS
C-5
<PAGE> 135
EXHIBIT D
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF SERIES CLOSING DATE REPORT
<PAGE> 136
EXHIBIT D
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF SERIES CLOSING DATE REPORT
PROFFITT'S, INC.
--------------------------------------
PROFFITT'S CREDIT CARD MASTER TRUST
--------------------------------------
The undersigned, duly authorized representative of Proffitt's, Inc., as
Servicer (the "Servicer") pursuant to the Master Pooling and Servicing Agreement
dated as of July __, 1997, by and among Proffitt's Credit Corporation, as
Transferor, Proffitt's, Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"), does hereby certify to the best of his
or her knowledge that:
1. The Servicer is as of the date hereof the Servicer under the Pooling
and Servicing Agreement. Capitalized terms used but not defined in this
Certificate shall have their respective meanings set forth in the Pooling and
Servicing Agreement.
2. The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreement to execute and deliver this Certificate to the Trustee.
3. This Certificate is delivered pursuant to Section 3.4(a) of the
Pooling and Servicing Agreement.
4. The Aggregate Principal Receivables as of the end of the day two
Business Days preceding the Closing Date for Series ______ was $____________.
[5. The Transferor Amount as of the end of the day two Business Days
preceding the Closing Date for Series ___ was $______ and the Transferor
Interest Percentage as of such date was ______%.] [insert if applicable]
6. The Transferor Interest Percentage after giving effect to the
issuance of the Investor Certificates of Series _____ is expected to be not less
than ____%.
D-1
<PAGE> 137
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the
Servicer, has duly executed this Certificate this ___ day of ______, ____.
PROFFITT'S, INC.,
as Servicer
By:
--------------------------------
Name:
Title:
D-2
<PAGE> 138
EXHIBIT E
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF MONTHLY SERVICER'S CERTIFICATE
<PAGE> 139
EXHIBIT E
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF MONTHLY SERVICER'S CERTIFICATE
PROFFITT'S, INC.
--------------------------------------
PROFFITT'S CREDIT CARD MASTER TRUST
--------------------------------------
The undersigned, a duly authorized representative of Proffitt's, Inc.
("Proffitt's"), as Servicer, pursuant to the Master Pooling and Servicing
Agreement dated as of July ___, 1997 (the "Pooling and Servicing Agreement"),
between Proffitt's Credit Corporation, as Transferor, Proffitt's as Servicer,
and Norwest Bank Minnesota, National Association, as Trustee, does hereby
certify as follows:
<TABLE>
<S> <C>
1. Capitalized terms used but not defined in this Officer's Certificate
have their respective meanings set forth in the Pooling and
Servicing Agreement.
2. As of the date hereof, Proffitt's is the Servicer under the Pooling
and Servicing Agreement.
3. The undersigned is a Servicing Officer.
4. This Officer's Certificate is delivered pursuant to Section 3.4 of
the Pooling and Servicing Agreement.
5. The aggregate amount of Collections processed for preceding Monthly
Period was equal to ....................................................... $
---------
6. The aggregate amount of Collections of Finance Charge Receivables
for the preceding Monthly Period was equal to ............................. $
---------
7. The aggregate amount of Collections of Principal Receivables for
preceding Monthly Period was equal to .................................... $
---------
</TABLE>
E-1
<PAGE> 140
<TABLE>
<S> <C>
8. The Investor Percentage with respect to
Collections of Principal Receivables for such Monthly
Period was equal to:
Series............................................................... _____%
Series............................................................... _____%
etc.
9. The Investor Percentage with respect to Collections of Finance Charge
Receivables with respect to the preceding Monthly Period was equal
to:
Series............................................................... _____%
Series............................................................... _____%
etc.
10. The Investor Percentage with respect to Defaulted Receivables with
respect to the preceding Monthly Period was equal to:
Series............................................................... _____%
Series............................................................... _____%
etc.
11. The total amount to be distributed to Investor Certificateholders on
the next succeeding Distribution Date is equal to:
Series.............................................................. $______
Series.............................................................. $______
etc.
12. The amount to be distributed to Investor Certificateholders on the
next succeeding Distribution Date per $1,000 original principal
amount is equal to:
Series.............................................................. $______
Series.............................................................. $______
etc.
13. The amount of such distribution allocable to principal is equal to:
Series.............................................................. $______
Series.............................................................. $______
etc.
14. The amount of such distribution allocable to principal per $1,000
original principal amount is equal to:
Series.............................................................. $______
Series.............................................................. $______
etc.
</TABLE>
E-2
<PAGE> 141
<TABLE>
<S> <C>
15. The amount of such distribution allocable to interest is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
16. The amount of such distribution allocable to interest per $1,000
original principal amount is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
17. The aggregate outstanding balance of Accounts which were delinquent
as of the last day of the immediately preceding Monthly Period by:
31-60 days....................................................... $_________
61-90 days....................................................... $_________
91 days or more ................................................. $_________
18. The Investor Default Amount for the preceding Monthly Period was
equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
19. (a)The amount of Investor Charge Offs with respect to the next
succeeding Distribution Date is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
(b) The amount of reimbursement of Investor Charge Offs with
respect to the next succeeding Distribution Date is equal to :
Series.............................................................. $_________
Series.............................................................. $_________
etc.
20. The amount of the Monthly Servicing Fee required to be paid on the
next succeeding Distribution Date is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
</TABLE>
E-3
<PAGE> 142
<TABLE>
<S> <C>
21. The existing Deficit Controlled [Amortization] [Accumulation] Amount,
if applicable, is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
22. The aggregate amount of Receivables in the Trust at the close of
business on the last day of the preceding Monthly Period was equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
23. The Investor Amount at the close of business on the last day of the
preceding Monthly Period was equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
24. The available amount of applicable Enhancement, if any, is equal to:
Series.............................................................. $_________
Series.............................................................. $_________
etc.
25. Attached hereto is a true and correct copy of the Monthly
Certificateholder's Statement required to be delivered by the
Servicer on the date of this Officer's Certificate to the Trustee in
respect of each Series outstanding pursuant to the Pooling and
Servicing Agreement and the Supplements thereto.
26. As of the date hereof [no Pay Out Event with respect to any Series
has occurred during or with respect to the preceding Monthly Period]
[a Pay Out Event has occurred with respect to Series ______________]
</TABLE>
E-4
<PAGE> 143
IN WITNESS WHEREOF, the undersigned, a Servicing Officer, has duly
executed and delivered this certificate this _______________ day of
- ----------------------, ----.
PROFFITT'S, INC.,
as Servicer
By:
-------------------------------------
Name:
Title:
-------------------------------
E-5
<PAGE> 144
EXHIBIT F
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF ANNUAL SERVICER'S CERTIFICATE
<PAGE> 145
EXHIBIT F
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF ANNUAL SERVICER'S CERTIFICATE
PROFFITT'S, INC.
--------------------------------------
PROFFITT'S CREDIT CARD MASTER TRUST
--------------------------------------
The undersigned, a duly authorized representative of Proffitt's, Inc.
("Proffitt's"), as Servicer, pursuant to the Master Pooling and Servicing
Agreement dated as of July ___, 1997 (the "Pooling and Servicing Agreement"),
between Proffitt's Credit Corporation, as Transferor, Proffitt's as Servicer,
and Norwest Bank Minnesota, National Association, as Trustee, does hereby
certify that:
1. Capitalized terms used but not defined in this Officer's
Certificate have their respective meanings set forth in the
Pooling and Servicing Agreement.
2. As of the date hereof, Proffitt's is the Servicer under the
Pooling and Servicing Agreement.
3. The undersigned is duly authorized pursuant to the Pooling and
Servicing Agreement to execute and deliver this Officer's
Certificate to the Trustee.
4. This Officer's Certificate is delivered pursuant to Section
3.5 of the Pooling and Servicing Agreement.
5. A review of the activities of the Servicer during the calendar
year ended December 31, ________ and of its performance under
the Pooling and Servicing Agreement was made under my
supervision.
6. Based on such review, to the best of the undersigned's
knowledge, the Servicer has fully performed all its
obligations under the Pooling and Servicing Agreement
throughout such calendar year and no event which, with the
giving of notice or passage of time or both, would constitute
a Servicer Default has occurred or is continuing except as
set forth in paragraph 7 below.
F-1
<PAGE> 146
7. The following is a description of each Servicer Default under
the provisions of the Pooling and Servicing Agreement known to
me to have been made during the year ended December 31,
________, which sets forth in detail the (i) nature of each
such Servicer Default, (ii) the action taken by the Servicer,
if any, to remedy each such Servicer Default and (iii) the
current status of each such Servicer Default:
IN WITNESS WHEREOF, the undersigned, a duly authorized Servicing
Officer of the Servicer, has duly executed this Officer's Certificate this
________ day of __________, ____.
PROFFITT'S, INC.,
as Servicer
By:
------------------------------------
Name:
Title:
F-2
<PAGE> 147
EXHIBIT G
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF OPINION OF COUNSEL WITH RESPECT TO
THE MASTER POOLING AND SERVICING AGREEMENT
AND
ADDITIONAL ACCOUNTS
G-1
<PAGE> 148
EXHIBIT G
TO THE
MASTER POOLING AND SERVICING AGREEMENT
PART ONE
PROVISIONS TO BE INCLUDED IN
OPINION OF COUNSEL TO BE
DELIVERED PURSUANT TO
SUBSECTIONS 2.6(C)(VI) AND 13.2(D) OF THE
MASTER POOLING AND SERVICING AGREEMENT
The Opinions set forth below may be subject to certain qualifications,
assumptions, limitations and exceptions taken or made in the opinion of the
Transferor's Counsel with respect to similar matters delivered on the Initial
Closing Date. Such Counsel may rely as to factual matters on Officer's
Certificates of the Transferor and the Servicer.
(i) The Assignment has been duly authorized, executed and delivered
by the Transferor and constitutes the valid and legally binding agreement of the
Transferor, enforceable against the Transferor in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, receivership,
conservatorship, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and, as applicable, the
rights of creditors of national banking associations and to general equity
principles.
(ii) The provisions of the Pooling and Servicing Agreement are
effective to create, in favor of the Trustee for the benefit of the
Certificateholders, a valid security interest in the Receivables and the
proceeds thereof. Such security interest constitutes a first priority perfected
security interest in such Receivables and the proceeds thereof.
(iii) No filing or other action, other than the filing of Uniform
Commercial Code financing statements in the recording offices in the Relevant
UCC State is necessary to perfect or maintain the security interest in the
Receivables and the proceeds thereof, except that (a) appropriate Uniform
Commercial Code continuation statements must be filed timely and prior to the
expiration of five years from the date of the original filing, (b) if Transferor
changes its name, identity or corporate structure, appropriate Uniform
Commercial Code financing statements must be filed prior to the expiration of
four months after the Transferor changes its name, identity or corporate
structure and (c) if the Transferor changes its chief executive office or
principal place of business to a jurisdiction other than the State of _______,
such security interest must be perfected in such jurisdiction within four months
of the date on which the change occurs (or earlier, if perfection under the
laws of such jurisdiction would have otherwise ceased as set forth in clause
(a) above).
G-1
<PAGE> 149
PART TWO
PROVISIONS TO BE INCLUDED IN
OPINION OF COUNSEL PURSUANT
TO SUBSECTION 13.1(g)
The counsel rendering this Opinion may rely on Officer's Certificates
of the Servicer as regards factual matters.
(i) The Amendment to the Master Pooling and Servicing Agreement,
attached hereto as Exhibit A (the "Amendment"), has been duly authorized,
executed and delivered by the Transferor and constitutes the valid and legally
binding agreement of the Transferor, enforceable in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, receivership,
conservatorship, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and the rights of
creditors of national banking associations and to general equity principles.
(ii) The Amendment has been entered into in accordance with the terms
and provisions of Section 13.1 of the Pooling and Servicing Agreement.
G-2
<PAGE> 150
EXHIBIT H
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF ANNUAL OPINION OF COUNSEL
<PAGE> 151
EXHIBIT H
TO THE
MASTER POOLING AND SERVICING AGREEMENT
PROVISIONS TO BE INCLUDED
IN ANNUAL OPINION OF COUNSEL
The Opinion set forth below, which is to be delivered pursuant to
subsection 13.2(d)(ii) of the Pooling and Servicing Agreement, may be subject to
certain qualifications, assumptions, limitations and exceptions taken or made in
the Opinion of Counsel delivered on the Initial Closing Date with respect to
similar matters.
No filing or other action, other than such filing or action described
in such Opinion, is necessary from the date of such Opinion through _________ of
the following year to continue the perfected status of interest of the Trust in
the collateral described in the financing statements referred to in such
opinion.
H-1
<PAGE> 152
EXHIBIT I
TO THE
MASTER POOLING AND SERVICING AGREEMENT
ACCOUNT AGREEMENTS
<PAGE> 153
EXHIBIT J
TO THE
MASTER POOLING AND SERVICING AGREEMENT
FORM OF DEPOSITORY AGREEMENT
(LETTER OF REPRESENTATIONS)
<PAGE> 154
SCHEDULE 1
TO THE
MASTER POOLING AND SERVICING AGREEMENT
LIST OF ACCOUNTS
(DELIVERED TO TRUSTEE ONLY)
<PAGE> 1
EXHIBIT 4.2
FORM OF
PROFFITT'S CREDIT CORPORATION
TRANSFEROR
PROFFITT'S, INC.
SERVICER
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
ON BEHALF OF THE CERTIFICATEHOLDERS
______________________________
SERIES 1997-2 SUPPLEMENT
DATED AS OF JULY___, 1997
TO THE
MASTER POOLING AND SERVICING AGREEMENT
DATED AS OF JULY_______, 1997
______________________________
$_______________
PROFFITT'S CREDIT CARD MASTER TRUST
SERIES 1997-2
THIS SERIES 1997-2 SUPPLEMENT, dated as of July___, 1997 (this "Series
Supplement"), is by and among PROFFITT'S CREDIT CORPORATION, a Nevada
corporation, as Transferor, PROFFITT'S, INC., a Tennessee corporation, as
Servicer, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States
(together with its successors in trust thereunder the "Trustee"), as trustee
under the Master Pooling and Servicing Agreement, dated as of July__, 1997 (the
"Agreement"), by and among the Transferor, the Servicer and the Trustee.
<PAGE> 2
PRELIMINARY STATEMENT
Section 6.9 of the Agreement provides, among other things, that the
Transferor and the Trustee may at any time and from time to time enter into one
or more Supplements to the Agreement for the purpose of authorizing the
issuance by the Trust to the Transferor, for execution and redelivery to the
Trustee for authentication, one or more Series of Investor Certificates.
SECTION A DESIGNATION. The Certificates issued hereunder shall be
designated generally as the "Series 1997-2 Certificates." The Series 1997-2
Certificates shall be one of the Series of Investor Certificates in Group One
and shall be a Principal Sharing Series. The Transferor and the Servicer each
hereby enter into this Series Supplement with the Trustee as required by
Section 6.9(c) of the Agreement to provide for the issuance, authentication and
delivery of the Class A Asset Backed Certificates, Series 1997-2, the Class B
Asset Backed Certificates, Series 1997-2 and the Class D Asset Backed
Certificates, Series 1997-2. In addition, this Supplement further creates a
fourth Class of uncertificated interests in the Trust which, except as
expressly provided for herein, shall be deemed to be "Investor Certificates"
for all purposes under the Agreement and this Series Supplement and which shall
be known as "Collateral Indebtedness Interest, Series 1997-2". The first
Distribution Date with respect to Series 1997-2 shall be the ______________,
1997 Distribution Date. In the event that any term or provision contained
herein shall conflict with or be inconsistent with any term or provision
contained in the Agreement, the terms and provisions of this Series Supplement
shall govern.
SECTION B DEFINITIONS. All capitalized terms not otherwise defined
herein are defined in the Agreement. All Article, Section or subsection
references herein shall mean Articles, Sections or subsections of the
Agreement, except as otherwise provided herein. Unless otherwise stated
herein, as the context otherwise requires or if such term is otherwise defined
in the Agreement, each capitalized term used or defined herein shall relate
only to the Series 1997-2 Certificates and no other Series of Certificates
issued by the Trust. The following words and phrases shall have the following
meanings with respect to the Series 1997-2 Certificates and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"Accumulation Commencement Monthly Period" shall mean the Monthly Period
in which the Accumulation Period commences.
"Accumulation Period" shall mean the Class A Accumulation Period and the
Class B Accumulation Period.
"Accumulation Period Factor" shall mean, for each Monthly Period, a
fraction, the numerator of which is equal to the sum of the initial investor
amounts of all outstanding Series, and the denominator of which is equal to
the sum of (a) the Initial
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<PAGE> 3
Investor Amount (plus the aggregate initial principal amount of any
Additional Class D Certificates), (b) the initial investor amounts (or other
applicable amounts) of all outstanding Series (other than Series 1997-2) which
are not expected to be in their revolving periods during such Monthly Period
and (c) the initial investor amounts (or other applicable amounts) of all other
outstanding Series which are not allocating Shared Principal Collections to
other Series and are expected to be in their revolving periods during such
Monthly Period.
"Accumulation Period Length" shall have the meaning specified in Section
4.15.
"Additional Class D Certificates" shall have the meaning specified in
Section 4.16.
"Allocable Amounts" shall mean with respect to any Distribution Date, the
sum of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount and the Class D Allocable Amount.
"Adjusted Investor Amount" shall mean, as of any date of determination, an
amount equal to the sum of the Class A Adjusted Investor Amount, the Class B
Adjusted Investor Amount, the Collateral Indebtedness Amount and the Class D
Investor Amount, in each case as of such date.
"Amortization Period" shall mean the Accumulation Period or the Rapid
Amortization Period.
"Available Cash Collateral Amount" shall mean, with respect to any
Distribution Date, the amount held in and available to be withdrawn from the
Cash Collateral Account on such date.
"Available Enhancement Amount" shall mean an amount equal to the sum of
the Available Cash Collateral Amount, the Collateral Indebtedness Amount and
the Class D Investor Amount.
"Available Principal Collections" shall mean, with respect to any
Distribution Date, an amount equal to (a) the applicable Investor Percentage of
Collections of Principal Receivables for the related Monthly Period, plus (b)
amounts designated as Available Principal Collections pursuant to Section 4.8,
minus (c) Reallocated Principal Collections for the related Monthly Period,
plus (d) Shared Principal Collections allocated to Series 1997-2.
"Available Reserve Account Amount" shall mean, with respect to any
Distribution Date, the lesser of (a) the amount held in and available to be
withdrawn from the Reserve Account on such date (before giving effect to any
deposit or withdrawal to be
- 2 -
<PAGE> 4
made to or from the Reserve Account on such date) and (b) the Required Reserve
Account Amount for such Distribution Date.
"Base Rate" shall mean, with respect to any Monthly Period, the sum of (a)
the annualized percentage equivalent of a fraction, the numerator of which is
equal to the Monthly Interest payable on the Series on the Distribution Date
immediately following the last day of such Monthly Period and the denominator
of which is the Investor Amount as of the last day of the preceding Monthly
Period and (b) the product of (i) 2.00% per annum and (ii) a fraction the
numerator of which is an amount equal to the Adjusted Investor Amount and the
denominator of which is the Investor Amount, in each case determined as of the
last day of such preceding Monthly Period.
"Business Day" shall have the meaning provided in the Agreement.
"Cash Collateral Account" shall have the meaning specified in Section
4.12(a).
"Cash Enhancement Surplus" shall mean, as of any date of determination,
the lesser of (a) the Enhancement Surplus and (b) the excess of the amount held
in and available to be withdrawn from the Cash Collateral Account over the
Required Cash Collateral Amount.
"Class A Accumulation Period" shall mean, unless a Pay Out Event with
respect to Series 1997-2 shall have occurred prior thereto, the period
commencing at the close of business on the last day of the _______________
Monthly Period, or such later date as shall be determined in accordance with
Section 4.15, and ending on the first to occur of (a) the commencement of the
Rapid Amortization Period, (b) the payment in full to Class A
Certificateholders of the Class A Investor Amount or (c) the Stated Series
Termination Date.
"Class A Additional Interest" shall have the meaning specified in Section
4.3(a).
"Class A Adjusted Investor Amount" shall mean, on any date of
determination while the Class A Certificates are outstanding, an amount equal
to the Class A Investor Amount minus the Principal Account Balance (but not
less than zero).
"Class A Adjustment Amount" shall mean, with respect to each Distribution
Date, an amount equal to the product of (i) the Series Adjustment Amount for
Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class A
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
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<PAGE> 5
"Class A Allocable Amount" shall mean, with respect to any Distribution
Date, the sum of the Class A Investor Default Amount and the Class A Adjustment
Amount.
"Class A Available Funds" shall mean, with respect to any Monthly Period,
an amount equal to the sum of (a) the applicable Class A Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement, (b) if such Monthly Period immediately precedes a Distribution Date
that occurs prior to the Class B Principal Commencement Date, the earnings (net
of losses and investment expenses), if any, earned on the Principal Account
with respect to such Monthly Period, (c) the amount, if any, to be withdrawn
from the Reserve Account on the Distribution Date immediately following the
last day of such Monthly Period and included in Class A Available Funds
pursuant to Section 4.14(d), and (d) the amount, if any, of investment earnings
(net of losses and investment expenses), if any, on amounts held in the Reserve
Account required to be included in Class A Available Funds pursuant to Section
4.14(b).
"Class A Certificate Rate" shall mean, with respect to the Class A
Certificates and each Interest Period, a per annum rate of ______%.
"Class A Certificateholder" shall mean any Person in whose name a Class A
Certificate is registered in the Certificate Register.
"Class A Certificates" shall mean any one of the Certificates executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-1.
"Class A Expected Payment Date" shall mean the ______________ 200__
Distribution Date.
"Class A Initial Investor Amount" shall mean the aggregate initial
principal amount of the Class A Certificates, which is $____________.
"Class A Interest Shortfall" shall have the meaning specified in Section
4.3(a).
"Class A Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Class A Initial Investor Amount, minus (b) the
aggregate amount of principal payments made to the Class A Certificateholders
prior to such date, minus (c) the excess, if any, of the aggregate amount of
Class A Investor Charge Offs for all prior Distribution Dates over the sum of
the aggregate amount of Class A Investor Charge Offs reimbursed pursuant to
Section 4.8(b) and, without duplication, the aggregate amount of the reductions
of the Series Adjustment Amounts allocable to the Class A Certificates
- 4 -
<PAGE> 6
pursuant to Section 4.7(f) prior to such date; provided, however, that the
Class A Investor Amount may not be reduced below zero.
"Class A Investor Charge Offs" shall have the meaning specified in Section
4.7(a).
"Class A Investor Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Class A Investor Percentage
for such Monthly Period.
"Class A Investor Percentage" shall be calculated by substituting the
Class A Adjusted Investor Amount and the Class A Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class A Monthly Interest" shall have the meaning specified in Section
4.3(a).
"Class A Monthly Principal" shall have the meaning specified in Section
4.4(a).
"Class A Penalty Rate" shall mean the sum of the Class A Certificate Rate
and 2.00% per annum.
"Class A Required Amount" shall have the meaning specified in Section
4.5(a).
"Class A Servicing Fee" shall have the meaning specified in Section G
hereof.
"Class B Accumulation Amount" means for any Distribution Date with respect
to the Class B Accumulation Period, an amount equal to one-half (1/2) of the
Class B Investor Amount as of the beginning of the Accumulation Period.
"Class B Accumulation Period" shall mean, unless a Pay Out Event with
respect to Series 1997-2 shall have occurred prior thereto, the period
commencing on the Distribution Date on which the Class A Investor Amount is
paid in full or if the Class A Investor Amount is paid in full on the Class A
Expected Payment Date, at the close of business on the Class A Expected Payment
Date, and ending on the first to occur of (a) the commencement of the Rapid
Amortization Period, (b) the payment in full to Class B Certificateholders of
the Class B Investor Amount or (c) the Stated Series Termination Date.
- 5 -
<PAGE> 7
"Class B Additional Interest" shall have the meaning specified in Section
4.3(b).
"Class B Adjusted Investor Amount" shall mean, on any date of
determination, an amount equal to the Class B Investor Amount minus, prior to
the payment in full of the Class A Investor Amount, the excess of the Principal
Account Balance over the Class A Investor Amount, and after the payment in full
of the Class A Investor Amount, the Principal Account Balance, if any (but not
less than zero).
"Class B Adjustment Amount" shall mean, with respect to each Distribution
Date, an amount equal to the product of (i) the Series Adjustment Amount for
Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class B
Adjusted Investor Amount and the denominator of which is the Adjusted Investor
Amount, each as of the last day of the Monthly Period preceding the related
Monthly Period.
"Class B Allocable Amount" shall mean, with respect to any Distribution
Date, the sum of the Class B Investor Default Amount and the Class B Adjustment
Amount.
"Class B Available Funds" shall mean, with respect to any Monthly Period,
an amount equal to the sum of (i) the applicable Class B Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement, (b) if such Monthly Period immediately precedes a Distribution Date
that occurs on or after the Class B Principal Commencement Date, the amount of
Principal Investment Proceeds, if any, with respect to such Monthly Period, (c)
the amount, if any, to be withdrawn from the Reserve Account on the
Distribution Date immediately following the last day of such Monthly Period and
included in Class B Available Funds pursuant to Section 4.14(d), and (d) the
amount, if any, required to be included in Class B Available Funds pursuant to
Section 4.14(b).
"Class B Certificate Rate" shall mean, with respect to the Class B
Certificates and each Interest Period, a per annum rate of _____%.
"Class B Certificateholder" shall mean any Person in whose name a Class B
Certificate is registered in the Certificate Register.
"Class B Certificates" shall mean any one of the Certificates executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-2.
"Class B Expected Payment Date" shall mean the _______________ 200__
Distribution Date.
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<PAGE> 8
"Class B Initial Investor Amount" shall mean the aggregate initial
principal amount of the Class B Certificates, which is $______________.
"Class B Interest Shortfall" shall have the meaning specified in Section
4.3(b).
"Class B Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Class B Initial Investor Amount, minus (b) the
aggregate amount of principal payments made to the Class B Certificateholders
prior to such date, minus (c) the aggregate amount of Class B Investor Charge
Offs for all prior Distribution Dates, minus (d) the amount of Class B
Subordinated Principal Collections allocated on all prior Distribution Dates
pursuant to Section 4.9(a), minus (e) an amount equal to the amount by which
the Class B Investor Amount has been reduced on all prior Distribution Dates
pursuant to Section 4.7(a), plus (f) the sum of the amount of Excess Spread and
Shared Excess Finance Charge Collections allocated and available on all prior
Distribution Dates pursuant to Section 4.8(e) for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c), (d) and (e) and,
without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Class B Investor Amount pursuant to Section
4.7(f) prior to such date; provided, however, that the Class B Investor Amount
may not be reduced below zero.
"Class B Investor Charge Offs" shall have the meaning specified in Section
4.7(b).
"Class B Investor Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Class B Investor Percentage
for such Monthly Period.
"Class B Investor Percentage" shall be calculated by substituting the
Class B Adjusted Investor Amount and the Class B Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount
respectively, in the definition of Investor Percentage.
"Class B Monthly Interest" shall have the meaning specified in Section
4.3(b).
"Class B Monthly Principal" shall have the meaning specified in Section
4.4(b).
"Class B Penalty Rate" shall mean the sum of the Class B Certificate Rate
and 2.00% per annum.
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<PAGE> 9
"Class B Principal Commencement Date" shall mean the Distribution Date on
which the Class A Investor Amount is paid in full or, if the Class A Investor
Amount is paid in full on the Class A Expected Payment Date and a Pay Out Event
has not commenced, the Distribution Date following the Class A Expected Payment
Date.
"Class B Required Amount" shall have the meaning specified in Section
4.5(b).
"Class B Servicing Fee" shall have the meaning specified in Section G
hereof.
"Class B Subordinated Principal Collections" shall mean, with respect to
any Monthly Period, an amount equal to the product of (i) the applicable Class
B Investor Percentage with respect to Collections of Principal Receivables and
(ii) the aggregate amount of Collections of Principal Receivables for such
Monthly Period.
"Class D Additional Interest" shall have the meaning specified in Section
4.3(d).
"Class D Adjustment Amount" shall mean, with respect to each Distribution
Date, an amount equal to the product of (i) the Series Adjustment Amount for
Series 1997-2 with respect to the related Monthly Period and (ii) the
percentage equivalent of a fraction the numerator of which is the Class D
Investor Amount and the denominator of which is the Adjusted Investor Amount,
each as of the last day of the Monthly Period preceding the related Monthly
Period.
"Class D Allocable Amount" shall mean, with respect to any Distribution
Date, the sum of the Class D Investor Default Amount and the Class D Adjustment
Amount.
"Class D Available Funds" shall mean, with respect to any Monthly Period,
an amount equal to the sum of the applicable Class D Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
"Class D Certificate Rate" shall mean, for any Interest Period with
respect to the Class D Certificates, the rate designated in the letter
agreement, dated ________________, 1997, between the Transferor and the
Trustee; provided, in no event shall the Class D Certificate Rate exceed LIBOR
plus 1.00% per annum.
"Class D Certificateholder" shall mean any Person in whose name a Class D
Certificate is registered in the Certificate Register.
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<PAGE> 10
"Class D Certificates" shall mean any one of the Certificates executed by
the Transferor and authenticated by or on behalf of the Trustee, substantially
in the form of Exhibit A-3.
"Class D Initial Investor Amount" shall mean the aggregate initial
principal amount of the Class D Certificates, which is $_____________.
"Class D Interest Shortfall" shall have the meaning specified in Section
4.3(d).
"Class D Investor Amount" shall mean, on any date of determination, an
amount equal to (a) the Class D Initial Investor Amount (plus the aggregate
initial principal amount of any Additional Class D Certificates), minus (b) the
aggregate amount of principal payments made to the Class D Certificateholders
prior to such date, minus (c) the amount of Class D Subordinated Principal
Collections allocated on all prior Distribution Dates pursuant to Section
4.9(a), (b) and (c), minus (d) an amount equal to the amount by which the Class
D Investor Amount has been reduced on all prior Distribution Dates pursuant to
Section 4.7(a), (b), (c) and (d), plus (e) the sum of the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available on
all prior Distribution Dates pursuant to Section 4.8(n) for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) and,
without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Class D Investor Amount pursuant to Section
4.7(f) prior to such date; provided, however, that the Class D Investor Amount
may not be reduced below zero.
"Class D Investor Charge Off" shall have the meaning provided in Section
4.7(d).
"Class D Investor Default Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Default Amount for
the related Monthly Period and (ii) the applicable Class D Investor Percentage
for such Monthly Period.
"Class D Investor Percentage" shall be calculated by substituting the
Class D Investor Amount and the Class D Initial Investor Amount in all
references to the Adjusted Investor Amount and the Initial Investor Amount,
respectively, in the definition of Investor Percentage.
"Class D Monthly Interest" shall have the meaning specified in Section
4.3(d).
"Class D Monthly Principal" shall have the meaning specified in Section
4.4(d).
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<PAGE> 11
"Class D Penalty Rate" shall mean, for any Interest Period, the sum of the
Class D Certificate Rate for such Interest Period and 2.00% per annum.
"Class D Servicing Fee" shall have the meaning specified in Section G
hereof.
"Class D Subordinated Principal Collections" shall mean, with respect to
any Monthly Period, an amount equal to the product of (i) the applicable Class
D Investor Percentage with respect to Collections of Principal Receivables and
(ii) the aggregate amount of Collections of Principal Receivables for such
Monthly Period.
"Closing Date" shall mean ______, 1997.
"Collateral Additional Interest" shall have the meaning specified in
Section 4.3(c).
"Collateral Adjustment Amount" shall mean, with respect to each
Distribution Date, an amount equal to the product of (i) the Series Adjustment
Amount for Series 1997-2 with respect to the related Monthly Period and (ii)
the percentage equivalent of a fraction the numerator of which is the
Collateral Indebtedness Amount and the denominator of which is the Adjusted
Investor Amount, each as of the last day of the Monthly Period preceding the
related Monthly Period.
"Collateral Allocable Amount" shall mean, with respect to any Distribution
Date, the sum of the Collateral Default Amount and the Collateral Adjustment
Amount.
"Collateral Available Funds" shall mean, with respect to any Monthly
Period, an amount equal to the applicable Collateral Investor Percentage of
Collections of Finance Charge Receivables and any other amounts that are to be
treated as Collections of Finance Charge Receivables in accordance with the
Agreement.
"Collateral Default Amount" shall mean, with respect to each Distribution
Date, an amount equal to the product of (i) the Default Amount for the related
Monthly Period and (ii) the applicable Collateral Investor Percentage
applicable during such Monthly Period.
"Collateral Indebtedness Amount" shall mean, on any date of determination,
an amount equal to (a) the Collateral Initial Indebtedness Amount, minus (b)
the aggregate amount of principal payments made to the Collateral Indebtedness
Holder on or prior to such date, minus (c) the amount of Collateral
Subordinated Principal Collections allocated on all prior Distribution Dates
pursuant to Sections 4.9(a) and 4.9(b), minus (d) an amount equal to the amount
by which the Collateral Indebtedness Amount has been reduced on all prior
Distribution Dates pursuant to Sections 4.7(a) and 4.7(b), plus (e) the sum of
the Excess Spread and Shared Excess Finance Charge Collections allocated and
available on all prior Distribution Dates for the purpose of
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reimbursing amounts deducted pursuant to the foregoing clauses (c)
and (d) and, without duplication, reductions of the Series Adjustment Amount
allocable to the Collateral Indebtedness Interest; provided, however, the
Collateral Indebtedness Amount may not be reduced below zero.
"Collateral Indebtedness Charge Off" shall have the meaning specified in
Section 4.7(c).
"Collateral Indebtedness Holder" shall mean the entity designated as such
in the Loan Agreement.
"Collateral Indebtedness Interest" shall mean a fractional undivided
interest in the Trust which shall consist of the right to receive, to the
extent necessary to make the required payments to the Collateral Indebtedness
Holder under this Series Supplement, the portion of Collections allocable
thereto under the Agreement and this Series Supplement, funds held in the
Collection Account allocable thereto pursuant to the Agreement and this Series
Supplement and, subject to the rights of the Series 1997-2 Certificateholders
with respect thereto, funds held in the Cash Collateral Account and the Reserve
Account.
"Collateral Initial Indebtedness Amount" shall mean the aggregate initial
principal amount of the Collateral Indebtedness Interest, which is
$______________.
"Collateral Interest Shortfall" shall have the meaning specified in
Section 4.3(c).
"Collateral Investor Percentage" shall be calculated by substituting the
Collateral Indebtedness Amount and the Collateral Initial Indebtedness Amount
in all references to the Adjusted Investor Amount and the Initial Investor
Amount, respectively, in the definition of Investor Percentage.
"Collateral Interest Shortfall" shall have the meaning specified in
Section 4.3(c).
"Collateral Monthly Interest" shall have the meaning specified in Section
4.3(c).
"Collateral Monthly Principal" shall have the meaning specified in Section
4.4(c).
"Collateral Penalty Rate" shall mean, for any Interest Period, the sum of
the Collateral Rate for such Interest Period and 2.00% per annum.
"Collateral Rate" shall mean the rate designated as such in the Loan
Agreement.
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<PAGE> 13
"Collateral Required Amount" shall have the meaning specified in Section
4.5(c).
"Collateral Servicing Fee" shall have the meaning specified in Section G
hereof.
"Collateral Subordinated Principal Collections" shall mean, with respect
to any Monthly Period, an amount equal to the product of (i) the applicable
Collateral Investor Percentage with respect to Collections of Principal
Receivables and (ii) the aggregate amount of Collections of Principal
Receivables for such Monthly Period.
"Controlled Accumulation Amount" shall mean (a) for any Distribution Date
with respect to the Class A Accumulation Period, $___________; provided,
however, if the Accumulation Period Length shall be determined to be less than
12 months in accordance with Section 4.15, the Controlled Accumulation Amount
with respect to the Class A Certificates shall be equal to (i) the product of
(x) the Class A Initial Investor Amount and (y) the Accumulation Period Factor
for such Monthly Period divided by (ii) the Required Accumulation Factor Number
and (b) for any Distribution Date with respect to the Class B Accumulation
Period, $__________.
"Controlled Deposit Amount" shall mean, for any Distribution Date with
respect to the Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.
"Covered Amount" shall mean (a) for any Distribution Date with respect to
the Class A Accumulation Period or the first Special Distribution Date, if such
Special Distribution Date occurs on or prior to the Distribution Date on which
the Class A Investor Amount shall be paid in full, an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360, (ii) the
Class A Certificate Rate and (iii) the Principal Account Balance, if any, as of
the preceding Distribution Date and (b) for any Distribution Date with respect
to the Class B Accumulation Period or the first Special Distribution Date, if
such Special Distribution Date occurs after the Distribution Date on which the
Class A Investor Amount shall have been paid in full, an amount equal to the
product of (i) a fraction, the numerator of which is the actual number of days
in the related Interest Period and the denominator of which is 360, (ii) the
Class B Certificate Rate and (iii) the Principal Account Balance, if any, as of
the preceding Distribution Date.
"Defaulted Receivables" shall mean for any Monthly Period, the Principal
Receivables in Accounts which became Defaulted Accounts during such Monthly
Period.
"Deficit Controlled Accumulation Amount" shall mean (a) on the first
Distribution Date with respect to the Class A Accumulation Period or the Class
B Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation
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<PAGE> 14
Amount for such Distribution Date over the amount deposited into the Principal
Account as Class A Monthly Principal or Class B Monthly Principal, as the case
may be, for such Distribution Date, and (b) on each subsequent Distribution
Date with respect to the Class A Accumulation Period or the Class B
Accumulation Period, the excess, if any, of the applicable Controlled Deposit
Amount for such subsequent Distribution Date over the amount deposited into the
Principal Account as Class A Monthly Principal or Class B Monthly Principal, as
the case may be, for such subsequent Distribution Date.
"Enhancement Surplus" shall mean, with respect to any Distribution Date,
the excess, if any, of (a) the sum of the amount held in and available to be
withdrawn from the Cash Collateral Account, the Collateral Indebtedness Amount
and the Class D Investor Amount over (b) the Required Enhancement Amount.
"Excess Spread" shall mean, with respect to any Distribution Date, the sum
of the amounts, if any, specified pursuant to Sections 4.6(a)(iv), 4.6(b)(iii),
4.6(c)(ii), 4.6(d)(ii) and 4.12(b) with respect to such Distribution Date.
"Finance Charge Shortfall" shall have the meaning specified in Section
4.11.
"Initial Investor Amount" shall mean the aggregate initial principal
amount of the Series 1997-2 Certificates, which is $_______________.
"Interest Period" shall mean, with respect to any Distribution Date, the
period from and including the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first Distribution Date, from and
including the Closing Date) to, but excluding, such Distribution Date.
"Investor Amount" shall mean, as of any date of determination, an amount
equal to the sum of the Class A Investor Amount, the Class B Investor Amount,
the Collateral Indebtedness Amount and the Class D Investor Amount, in each
case as of such date.
"Investor Default Amount" shall mean, with respect to any Distribution
Date, an amount equal to the product of (a) the Default Amount for the
immediately preceding Monthly Period and (b) the applicable Investor Percentage
applicable to Allocable Amounts for such Monthly Period.
"Investor Monthly Servicing Fee" shall have the meaning specified in
Section G hereof.
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<PAGE> 15
"Investor Percentage" shall mean:
(a) with respect to (A) Principal Receivables during any Monthly
Period with respect to the Revolving Period, (B) Finance Charge Receivables
during any Monthly Period other than during a Rapid Amortization Period,
and (C) the Allocable Amount during any Monthly Period, the percentage
equivalent of a fraction the numerator of which is equal to the Adjusted
Investor Amount as of the last day of the immediately preceding Monthly
Period (or the Initial Investor Amount, in the case of the first Monthly
Period applicable to Series 1997-2) and the denominator of which is the
greater of (i) the sum of the aggregate Principal Receivables in the Trust
and the Excess Funding Amount, in each case at the close of business on the
last day of the immediately preceding Monthly Period and (ii) the sum of
the numerators used to calculate the applicable investor percentages with
respect to Principal Receivables, Finance Charge Receivables or the
Allocable Amount, as applicable, for all Series outstanding as of the date
on which such determination is being made;
(b) with respect to Finance Charge Receivables (and any other amounts
treated as Finance Charge Receivables) during any Monthly Period with
respect to a Rapid Amortization Period, the percentage equivalent of a
fraction the numerator of which is equal to the Adjusted Investor Amount as
of the last day of the Revolving Period and the denominator of which is the
greater of (i) the sum of the aggregate Principal Receivables in the Trust
and the Excess Funding Amount, in each case at the close of business on the
last day of the immediately preceding Monthly Period and (ii) the sum of
the numerators use to calculate the investor percentages with respect to
Finance Charge Receivables for all Series outstanding as of the date on
which such determination is being made; and
(c) with respect to Principal Receivables during any Monthly Period
with respect to an Amortization Period, the percentage equivalent of a
fraction the numerator of which is equal to the Adjusted Investor Amount as
of the last day of the Revolving Period and the denominator of which is the
greater of (i) the sum of the aggregate Principal Receivables in the Trust
and the Excess Funding Amount, in each case at the close of business on the
last day of the immediately preceding Monthly Period and (ii) the sum of
the numerators used to calculate the investor percentages with respect to
Principal Receivables for all Series outstanding as of the date on which
such determination is being made; provided, however, that during an
Accumulation Period, (A) the Investor Percentage of Principal Receivables
may be reset by and at the option of the Transferor in connection with the
issuance of a new Series (and any such reset Investor
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<PAGE> 16
Percentage with respect to Principal Receivables will also apply in
any Rapid Amortization Period following the Accumulation Period) for each
Monthly Period to a fixed percentage, which shall not be greater than the
fraction described above and shall not be less than the greater of (i) a
fraction, (I) the numerator of which shall be the Adjusted Investor Amount
on the last day of the preceding Monthly Period, and (II) the denominator
of which shall be the greater of (x) the sum of Principal Receivables and
the Excess Funding Amount as of the end of such day and (y) the sum of the
numerators used to calculate the investor percentages with respect to
Principal Receivables for all Series outstanding as of such date of
determination, and (ii) a fraction that when multiplied by the amount of
collections allocable to Principal Receivables for the preceding Monthly
Period will equal 110% of the sum of the Controlled Accumulation Amount for
such preceding Monthly Period, and (B) if the Series 1997-2 Certificates
are paired with a Paired Series and a Rapid Amortization Period commences
for such Paired Series, the Transferor may, by written notice to the
Trustee and Servicer, designate a different numerator to be used to
determine such percentage.
"LIBOR" shall have the meaning specified in the Loan Agreement.
"Loan Agreement" shall mean the agreement among the Transferor, the
Servicer, the Trustee and the Collateral Indebtedness Holder, dated as of the
date hereof, as amended, supplemented or otherwise modified from time to time
in accordance with its terms.
"Minimum Transferor Interest Percentage" shall have the meaning specified
in Section C.
"Monthly Interest" shall mean, with respect to any Distribution Date, the
sum of the Class A Monthly Interest, the Class B Monthly Interest, the
Collateral Monthly Interest and the Class D Monthly Interest for such
Distribution Date.
"Paired Series" shall have the meaning specified in Section L2.
"Portfolio Adjusted Yield" shall mean, with respect to any Monthly Period,
the Portfolio Yield with respect to such Monthly Period minus the Base Rate
with respect to such Monthly Period.
"Portfolio Yield" shall mean, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is (x)
the sum of (i) the amount of collections of Finance Charge Receivables and
Shared Excess Finance Charge Collections allocated to the Series 1997-2
Certificates for such Monthly Period, plus (ii) the amount of investment
earnings (net of investment expenses and losses), if any, on the Principal
Account and Reserve Account balances, plus (iii) interest and
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<PAGE> 17
earnings (net of investment expenses and losses, if any) on funds held in
the Cash Collateral Account and included as Excess Spread pursuant to Section
4.12(b) plus (iv) the amount of funds withdrawn from the Reserve Account minus
(v) an amount equal to the amount of Defaulted Receivables allocable to the
Series 1997-2 Certificates for such Monthly Period, and the denominator of
which is (y) the Investor Amount as of the last day of the preceding Monthly
Period.
"Principal Account" shall have the meaning specified in Section 4.13(a).
"Principal Account Balance" shall mean, with respect to any date of
determination during the Accumulation Period, the amount, if any, of funds held
in the Principal Account on such date of determination.
"Principal Investment Proceeds" shall have the meaning specified in
Section 4.13(b).
"Principal Shortfall" shall have the meaning specified in Section 4.10.
"Rapid Amortization Period" shall mean the period commencing at the close
of business on the day on which a Pay Out Event with respect to Series 1997-2
is deemed to have occurred, and ending on the first to occur of (a) the payment
in full of the Class A Investor Amount, the Class B Investor Amount, the
Collateral Indebtedness Amount and the Class D Investor Amount, respectively or
(b) the Stated Series Termination Date.
"Rating Agencies" shall mean Moody's, Standard & Poor's, and, if
applicable, such other nationally recognized statistical rating organization
that has rated the Certificates at the request of the Company.
"Reallocated Principal Collections" shall mean, with respect to any
Monthly Period, an amount equal to the sum of Class B Subordinated Principal
Collections, Collateral Subordinated Principal Collections and Class D
Subordinated Principal Collections for such Monthly Period.
"Reference Banks" shall mean four major banks in the London interbank
market selected by the Servicer upon notice to the Trustee.
"Required Accumulation Factor Number" shall be a fraction, rounded upwards
to the nearest whole number, the numerator of which is one and the denominator
of which is equal to the lowest monthly principal payment rate on the Accounts
for the 12 months preceding the date of such calculation (or any lower monthly
principal payment rate selected by the Servicer at its option in its sole
discretion), expressed as a decimal.
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<PAGE> 18
"Required Cash Collateral Amount" shall mean the amount specified as such
in the Loan Agreement or such higher amount designated by the Transferor.
"Required Draw Amount" shall have the meaning specified in Section
4.12(c).
"Required Enhancement Amount" shall mean, with respect to any Distribution
Date, an amount equal to the product of the Adjusted Investor Amount (after
giving effect to all reductions thereof to be made on such Distribution Date)
and ___%, but not less than $____________; provided, however, that (i) if a Pay
Out Event shall have occurred, the Required Enhancement Amount for each
Distribution Date thereafter (subject to clause (ii) below) shall equal the
Required Enhancement Amount for the Distribution Date immediately preceding the
occurrence of such Pay Out Event, (ii) in no event shall the Required
Enhancement Amount exceed the sum of the Class A Adjusted Investor Amount and
the Class B Adjusted Investor Amount on such date and (iii) the Required
Enhancement Amount may be reduced without the consent of the Series 1997-2
Certificateholders if (x) the Transferor shall have received written notice
from each Rating Agency (with a copy delivered to the Trustee) that such
reduction will not result in the reduction or withdrawal of the then current
rating of the Class A or Class B Certificates, (y) the Transferor shall have
delivered to the Trustee an Officer's Certificate to the effect that, based on
the facts known to such officer at such time, in the reasonable belief of the
Transferor, such reduction will not cause a Pay Out Event or an event that,
after the giving of notice or the lapse of time, would constitute a Pay Out
Event, to occur with respect to Series 1997-2 and (z) the Transferor shall have
provided an Opinion of Counsel addressed to the Trustee, dated the date of such
reduction, that such reduction will not (a) adversely affect the tax
characterization of any outstanding Series or Class with respect to which an
Opinion of Counsel addressed to the Trustee was delivered at the time of their
issuance that such Investor Certificates would be characterized as debt, (b)
cause the Trust to be classified, for federal income tax purposes, as an
association (or publicly traded partnership) taxable as a corporation and (c)
cause or constitute an event in which gain or loss would be recognized by any
Certificateholder.
"Required Reserve Account Amount" shall mean, with respect to any
Distribution Date prior to the Reserve Account Funding Date, $0, and on or
after the Reserve Account Funding Date, an amount equal to (a) ____% of the
Class A Investor Amount as of the preceding Distribution Date (after giving
effect to all changes therein on such date) or (b) any other amount designated
by the Transferor; provided, however, that if such designation pursuant to (b)
above is of a lesser amount, (i) the Rating Agency Condition shall have been
satisfied and (ii) the Transferor shall have delivered to the Trustee an
Officer's Certificate to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of such officer, such
designation will not cause a Pay Out Event or an event that, after the giving
of notice or the lapse of time, would cause a Pay Out Event, to occur with
respect to Series 1997-2.
"Reserve Account" shall have the meaning specified in Section 4.14(a).
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<PAGE> 19
"Reserve Account Funding Date" shall mean the Distribution Date with
respect to the Monthly Period which commences three (3) months prior to the
Class A Accumulation Period, provided that the Reserve Account Funding Date
shall be accelerated to (a) the Distribution Date with respect to the Monthly
Period which commences four (4) months prior to the Class A Accumulation Period
if the average of the Portfolio Adjusted Yields for any three consecutive
Monthly Periods shall be less than ____%; (b) the Distribution Date with
respect to the Monthly Period which commences six (6) months prior to the Class
A Accumulation Period if the average of the Portfolio Adjusted Yields for any
three (3) consecutive Monthly Periods shall be less than ____%; or (c) the
Distribution Date which commences 12 months prior to the Class A Accumulation
Period if the average of the Portfolio Adjusted Yields for any three (3)
consecutive Monthly Periods shall be less than ____%.
"Reserve Account Surplus" shall mean, as of any date of determination, the
amount, if any, by which the amount held in the Reserve Account exceeds the
Required Reserve Account Amount.
"Reserve Draw Amount" shall have the meaning specified in Section 4.14(c).
"Revolving Period" shall mean the period beginning on the Closing Date and
ending on the earlier of (a) the close of business on the day preceding the
commencement of the Class A Accumulation Period and (b) the close of business
on the day preceding the commencement of the Rapid Amortization Period.
"Series Adjustment Amount" shall mean, with respect to each Distribution
Date, an amount equal to the product of (i) any unpaid Adjustment Payment
Obligation for the related Monthly Period and (ii) the Investor Percentage
applicable to allocations of Allocable Amounts during the related Monthly
Period, as calculated on the last day of the Monthly Period preceding the
related Monthly Period.
"Series 1997-2" shall mean the Series the terms of which are specified in
this Series Supplement.
"Series 1997-2 Certificate" shall mean a Class A Certificate, a Class B
Certificate, a Class D Certificate and/or, unless the context requires
otherwise, the Collateral Indebtedness Interest.
"Series 1997-2 Certificateholder" shall mean a Class A Certificateholder,
a Class B Certificateholder, a Class D Certificateholder and/or, unless the
context requires otherwise, the Collateral Indebtedness Holder.
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<PAGE> 20
"Servicing Fee" shall mean the amount paid monthly from the Trust to the
Servicer and which shall be equal to one-twelfth (1/12th) of the product of the
Servicing Fee Percentage and the Adjusted Investor Amount.
"Servicing Fee Percentage" shall mean 2.00% per annum.
"Shared Excess Finance Charge Collections" shall mean, with respect to any
Monthly Period, the aggregate amount for all outstanding Series in Group One of
Collections of Finance Charge Receivables which the related Supplements specify
are to be treated as "Shared Excess Finance Charge Collections" for such
Monthly Period.
"Shared Principal Collections" shall mean, with respect to any Monthly
Period, the aggregate amount for all outstanding Series in Group One of
Collections of Principal Receivables available after covering required
distributions and deposits under each Series Supplement and that are to be
treated as "Shared Principal Collections" pursuant to Section 4.6(e)(iii) and
Section 4.6(f)(v) and the respective applicable sections of any Supplement for
other Series in Group One.
"Special Distribution Date" shall mean each Distribution Date with respect
to the Rapid Amortization Period.
"Stated Series Termination Date" shall mean the October 200__ Distribution
Date.
"Telerate Page 3750" shall mean the display page currently so designated
on the Dow Jones Telerate Service (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).
"Treasury" shall mean the United States Department of the Treasury and any
successor Governmental Authority thereto.
SECTION MINIMUM TRANSFEROR INTEREST PERCENTAGE AND MINIMUM AGGREGATE
PRINCIPAL RECEIVABLES. The Minimum Transferor Interest Percentage applicable
to the Series 1997-2 Certificates shall be 0%; provided, however, that (a) the
Transferor may, at its option and in its sole discretion, designate a higher
percentage as the Minimum Transferor Interest Percentage so long as, after
giving effect to such designation and any repurchase of Investor Certificates
or designation of Additional Accounts, the Transferor Amount shall equal or
exceed the Minimum Transferor Amount and (b) if on any Distribution Date during
the Revolving Period (after giving effect to all distributions and adjustments
to be made on such Distribution Date), the portion of the Class D Investor
Amount owned by the Transferor is less than 2% of the Investor Amount and the
Minimum Transferor Interest Percentage is less than 2%, the Transferor shall,
on or before the last day of the second Monthly Period following the Monthly
Period in which such Distribution Date occurred (unless the portion of the
Class D Investor Amount owned by the Transferor shall then equal or exceed 2%
of the Investor Amount), (i) repurchase or
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<PAGE> 21
otherwise repay Investor Certificates (to the extent permitted by any
Supplement) or designate Additional Accounts to the extent necessary to permit
the designation of a Minimum Transferor Interest Percentage of 2%
without causing the Transferor Amount to be less than the Minimum Transferor
Amount and (ii) upon compliance with clause (i), designate 2% as the Minimum
Transferor Interest Percentage. In the event that the Transferor shall have
designated a Minimum Transferor Interest Percentage in excess of 0%, the
Transferor may, during the Revolving Period, designate a lower percentage (but
not less than 0%) if the portion of the Class D Investor Amount owned by the
Transferor as a percentage of the Investor Amount averaged over the three
Distribution Dates preceding such designation (after giving effect to all
distributions and adjustments made on each such Distribution Date) shall equal
or exceed 4%; provided, however, that such lower percentage may not be less
than 2% if the portion of the Class D Investor Amount owned by the Transferor
as a percentage of the Investor Amount on the Distribution Date preceding such
designation (after giving effect to all distributions and adjustments made on
such Distribution Date) shall not equal or exceed 2%.
SECTION D OPTIONAL PURCHASE; REASSIGNMENT AND TRANSFER TERMS. All the
Series 1997-2 Certificates may be repurchased by, and reassigned and
transferred to, the Transferor in the Transferor's sole discretion, on any
Distribution Date on or after the Distribution Date on which the sum of the
Class A Adjusted Investor Amount, the Class B Adjusted Investor Amount, the
Collateral Indebtedness Amount and the amount of the Class D Investor Amount
held by parties other than the Transferor or any of its affiliates is less than
or equal to 10% of the sum of the Class A Investor Amount on the Closing Date,
the Class B Investor Amount on the Closing Date, the Collateral Indebtedness
Amount on the Closing Date and the highest amount of the Class D Investor
Amount held by parties other than the Transferor or any of its affiliates since
the Closing Date. The repurchase price for the Series 1997-2 Certificates will
be equal to (a) the Adjusted Investor Amount, plus (b) accrued and unpaid
interest on the 1997-2 Certificates, less (c) the amount held in the Collection
Account allocable to Series 1997-2 to be applied other than to deposits to the
Reserve Account and any excess payable to the Transferor as holder of the
Exchangeable Transferor Certificate. The provisions of this Section are
subject to the provisions of Section 12.2 of the Agreement.
SECTION E DELIVERY AND PAYMENT FOR THE CERTIFICATES. The Trustee shall
deliver the Series 1997-2 Certificates when authenticated in accordance with
Section 6.2 of the Agreement (except in the case of the Collateral Indebtedness
Interest, which shall be in uncertificated form). The Class D and Collateral
Indebtedness Interest shall bear legends appropriately limiting their transfer
in accordance herewith and applicable securities laws.
SECTION F FORM OF DELIVERY OF THE SERIES 1997-2 CERTIFICATES. The Class
A Certificates and the Class B Certificates shall be delivered as provided in
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<PAGE> 22
Section 6.11 of the Agreement. The Class D Certificates shall be delivered in
registered form. The Collateral Indebtedness Interest shall be issued in
uncertificated form.
SECTION SERVICING COMPENSATION. The share of the Monthly Servicing Fee
allocable to the Series 1997-2 Certificateholders with respect to any
Distribution Date (the "Investor Monthly Servicing Fee") shall be equal to
one-twelfth (1/12th) of the product of (a) the Servicing Fee Percentage and (b)
each of the Class A Adjusted Investor Amount, the Class B Adjusted Investor
Amount, the Collateral Indebtedness Amount and the Class D Investor Amount,
respectively, as of the last day of the immediately preceding Monthly Period;
provided, however, with respect to the first Distribution Date, the Investor
Monthly Servicing Fee shall be equal to $__________. The share of the Investor
Monthly Servicing Fee allocable to the Class A Certificateholders with respect
to any Distribution Date (the "Class A Servicing Fee") shall be equal to the
product of (a) the Class A Investor Percentage applicable for allocation of
Allocable Amounts divided by the Investor Percentage applicable for allocation
of Allocable Amounts and (b) the Investor Monthly Servicing Fee; provided,
however, that with respect to the first Distribution Date, the Class A
Servicing Fee shall be equal to $____________. The share of the Investor
Monthly Servicing Fee allocable to the Class B Certificateholders with respect
to any Distribution Date (the "Class B Servicing Fee") shall be equal to the
product of (a) the Class B Investor Percentage applicable for allocation of
Allocable Amounts divided by the Investor Percentage applicable for allocation
of Allocable Amounts and (b) the Investor Monthly Servicing Fee; provided,
however, that with respect to the first Distribution Date, the Class B
Servicing Fee shall be equal to $____________. The share of the Investor
Monthly Servicing Fee allocable to the Collateral Indebtedness Holder with
respect to any Distribution Date (the "Collateral Servicing Fee") shall be
equal to the product of (a) the Collateral Investor Percentage applicable for
allocation of Allocable Amounts divided by the Investor Percentage applicable
for allocation of Allocable Amounts and (b) the Investor Monthly Servicing Fee;
provided, however, that with respect to the first Distribution Date, the
Collateral Servicing Fee shall be equal to $____________. The share of the
Investor Monthly Servicing Fee allocable to the Class D Certificateholders with
respect to any Distribution Date (the "Class D Servicing Fee") shall be equal
to the product of (a) the Class D Investor Percentage applicable for allocation
of Allocable Amounts divided by the Investor Percentage applicable for
allocation of Allocable Amounts and (b) the Investor Monthly Servicing Fee;
provided, however, that with respect to the first Distribution Date, the Class
D Servicing Fee shall be equal to $___________. The Class A Servicing Fee, the
Class B Servicing Fee, the Collateral Servicing Fee and the Class D Servicing
Fee shall be payable solely to the extent amounts are available for
distribution in respect thereof pursuant to this Series Supplement. The
remainder of the Monthly Servicing Fee shall be paid [by the Transferor or]
from amounts allocable to other Series (as provided in the Agreement and the
Supplements relating to such other Series) and in no event shall the Trust, the
Trustee or the Series 1997-2 Certificateholders be liable for the share of the
Monthly Servicing Fee to be paid [by the Transferor or] from amounts allocable
to any other Series.
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<PAGE> 23
SECTION H. ARTICLE IV OF THE AGREEMENT. Any provisions of Article IV of
the Agreement which distribute Collections to the Transferor on the basis of
the Transferor Percentage shall continue to apply irrespective of the issuance
of the Series 1997-2 Certificates. Section 4.1 of the Agreement shall read in
its entirety as provided in the Agreement. Article IV of the Agreement (except
for Section 4.1) as it relates to Series 1997-2 shall read in its entirety as
follows:
ARTICLE IV
RIGHTS OF SERIES 1997-2 CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.2. COLLECTIONS AND ALLOCATIONS. The Servicer shall apply, or
shall instruct the Trustee to apply, all Collections, and other funds held in
the Collection Account that are allocated to the Series 1997-2 Certificates as
described in this Article IV. During the Revolving Period and the Accumulation
Period, Collections of Finance Charge Receivables allocable to Series 1997-2
with respect to each Monthly Period need not be deposited into the Collection
Account on a daily basis after an amount equal to Monthly Interest for the
related Distribution Date plus, if Proffitt's, Inc. is no longer the Servicer,
the Investor Monthly Servicing Fee for the related Distribution Date, has been
deposited into the Collection Account. During the Revolving Period, so long as
the Available Enhancement Amount is not less than the Required Enhancement
Amount, Collections of Principal Receivables allocable to Series 1997-2 with
respect to each Monthly Period need not be deposited into the Collection
Account on a daily basis during such Monthly Period; provided, however, that in
the event that the Minimum Transferor Amount exceeds the Transferor Amount on
any date, such Collections of Principal Receivables shall be deposited into the
Excess Funding Account until the Transferor Amount equals the Minimum
Transferor Amount; and provided, further, that on any date on which the sum of
the Aggregate Principal Receivables and the Excess Funding Amount is less than
the Aggregate Investor Amount, such Collections of Principal Receivables shall
be deposited into the Collection Account on a daily basis. During the
Accumulation Period, after an amount of Collections of Principal Receivables
allocable to Series 1997-2 equal to the Controlled Deposit Amount with respect
to each Monthly Period has been deposited into the Collection Account, and so
long as the Available Enhancement Amount is not less than the Required
Enhancement Amount, Collections of Principal Receivables allocable to Series
1997-2 with respect to each Monthly Period need not be deposited into the
Collection Account on a daily basis during such Monthly Period; provided,
however, that in the event that the Minimum Transferor Amount exceeds the
Transferor Amount on any date, such Collections of Principal Receivables shall
be deposited into the Excess Funding Account until the Transferor Amount equals
the Minimum Transferor Amount; and, provided, further, that on any date on
which the sum of the Aggregate Principal Receivables and the Excess Funding
Amount is less than the Aggregate Investor Amount, such Collections of
Principal Receivables shall be deposited into the Collection Account
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<PAGE> 24
on a daily basis. Notwithstanding the foregoing, the Servicer need not make
daily deposits of Collections into the Collection Account at any time when the
requirements of Section 4.1(f) of the Agreement are satisfied.
SECTION 4.3 DETERMINATION OF MONTHLY INTEREST.
(a) The amount of monthly interest ("Class A Monthly Interest")
distributable from the Collection Account with respect to the Class A
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class A Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class A
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class A Monthly Interest shall be equal to
$____________.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class A Interest Shortfall"),
of (x) the Class A Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class A Monthly
Interest on such Distribution Date. If the Class A Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class A Additional Interest") equal to one-twelfth (1/12th) of the product of
(i) the Class A Penalty Rate for the related Interest Period, and (ii) such
Class A Interest Shortfall (or the portion thereof which has not theretofore
been paid to Class A Certificateholders), shall be payable as provided herein
with respect to the Class A Certificates on each Distribution Date following
such Distribution Date to and including the Distribution Date on which such
Class A Interest Shortfall is paid to Class A Certificateholders.
Notwithstanding anything to the contrary herein, Class A Additional Interest
shall be payable or distributed to Class A Certificateholders only to the extent
permitted by applicable law.
(b) The amount of monthly interest ("Class B Monthly Interest")
distributable from the Collection Account with respect to the Class B
Certificates on any Distribution Date shall be an amount equal to one-twelfth
(1/12th) of the product of (i) the Class B Certificate Rate for the related
Interest Period, and (ii) the outstanding principal amount of the Class B
Certificates as of the preceding Record Date; provided, however, with respect to
the first Distribution Date, Class B Monthly Interest shall be equal to
$___________.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class B Interest Shortfall"),
of (x) the Class B Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class B Monthly
Interest on such Distribution Date. If the Class B Interest Shortfall with
respect to any Distribution Date is greater than zero, an additional amount
("Class B Additional Interest") equal to one-twelfth (1/12th) of the product of
(i) the Class B Penalty Rate for the related Interest Period, and (ii) such
Class B Interest Shortfall (or the portion thereof which has not theretofore
been paid to
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<PAGE> 25
Class B Certificateholders), shall be payable as provided herein with respect
to the Class B Certificates on each Distribution Date following such
Distribution Date to and including the Distribution Date on which such Class B
Interest Shortfall is paid to Class B Certificateholders. Notwithstanding
anything to the contrary herein, Class B Additional Interest shall be payable
or distributed to Class B Certificateholders only to the extent permitted by
applicable law.
(c) The amount of monthly interest ("Collateral Monthly Interest")
distributable from the Collection Account with respect to the Collateral
Indebtedness Interest on any Distribution Date shall be an amount equal to the
product of (i) the outstanding principal amount of the Collateral Indebtedness
Interest as of the preceding Record Date,(ii) the Collateral Rate for the
related interest Period, and (iii) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360; provided, however, with respect to the first Distribution Date, the
Collateral Monthly Interest shall be equal to $ ____.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Collateral Interest
Shortfall"), of (x) the Collateral Monthly Interest for such Distribution Date
over (y) the aggregate amount of funds allocated and available to pay such
Collateral Monthly Interest on such Distribution Date. If the Collateral
Interest Shortfall with respect to any Distribution Date is greater than zero,
an additional amount ("Collateral Additional Interest") equal to the product of
(i) (A) a fraction, the numerator of which is the actual number of days in such
Interest Period and the denominator of which is 360, times (B) the Collateral
Penalty Rate and (ii) such Collateral Interest Shortfall (or the portion thereof
which has not theretofore been paid to the Collateral Indebtedness Holder) shall
be payable as provided herein with respect to the Collateral Indebtedness
Interest on each Distribution Date following such Distribution Date to and
including the Distribution Date on which such Collateral Interest Shortfall is
paid to the Collateral Indebtedness Holder. Notwithstanding anything to the
contrary herein, Collateral Additional Interest shall be payable or distributed
to the Collateral Indebtedness Holder only to the extent permitted by applicable
law.
(d) The amount of monthly interest ("Class D Monthly Interest")
distributable from the Collection Account with respect to the Class D
Certificates on any Distribution Date shall be an amount equal to the product of
(i) the Class D Certificate Rate for the related Interest Period; (ii) the
outstanding principal amount of the Class D Certificates as of the preceding
Record Date; and (iii) a fraction, the numerator of which is the actual number
of days in such Interest Period and the denominator of which is 360; provided,
however, with respect to the first Distribution Date, Class D Monthly Interest
shall be equal to $ ______.
On the Determination Date preceding each Distribution Date, the
Servicer shall determine the excess, if any (the "Class D Interest Shortfall"),
of (x) the Class D Monthly Interest for such Distribution Date over (y) the
aggregate amount of funds allocated and available to pay such Class D Monthly
Interest on such Distribution
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<PAGE> 26
Date. If the Class D Interest Shortfall with respect to any Distribution Date
is greater than zero, an additional amount ("Class D Additional Interest")
equal to the product of (i) (A) the actual number of days in the related
Interest Period divided by 360, times (B) the Class D Penalty Rate and (ii)
such Class D Interest Shortfall (or the portion thereof which has not
theretofore been paid to Class D Certificateholders) shall be payable as
provided herein with respect to the Class D Certificates on each Distribution
Date following such Distribution Date to and including the Distribution Date on
which such Class D Interest Shortfall is paid to Class D Certificateholders.
Notwithstanding anything to the contrary herein, Class D Additional Interest
shall be payable or distributed to Class D Certificateholders only to the
extent permitted by applicable law.
SECTION 4.4 DETERMINATION OF MONTHLY PRINCIPAL.
(a) The amount of monthly principal ("Class A Monthly Principal")
distributable or available for deposit into the Principal Account from the
Collection Account with respect to the Class A Certificates on each Distribution
Date, beginning with the Distribution Date in the month following the month in
which an Amortization Period begins, shall be equal to the least of (x) the
Available Principal Collections held in the Collection Account and available for
distribution with respect to such Distribution Date, (y) with respect to the
Accumulation Period prior to the Class A Expected Payment Date, the Controlled
Deposit Amount for such Distribution Date and (z) the Class A Adjusted Investor
Amount on such Distribution Date.
(b) The amount of monthly principal ("Class B Monthly Principal")
distributable or available for deposit into the Principal Account from the
Collection Account with respect to the Class B Certificates on each Distribution
Date relating to an Amortization Period, beginning with the Class B Principal
Commencement Date, shall be equal to the least of (x) the Available Principal
Collections held in the Collection Account and available for distribution with
respect to such Distribution Date, minus the portion of such amounts applied to
Class A Monthly Principal on such Distribution Date, (y) for each Distribution
Date with respect to the Accumulation Period prior to the Class B Expected
Payment Date, the Controlled Deposit Amount for such Distribution Date and (z)
the Class B Adjusted Investor Amount on such Distribution Date.
(c) The amount, if any, of monthly principal ("Collateral Monthly
Principal") distributable with respect to the Collateral Indebtedness Interest
on each Distribution Date shall be equal to:
(i) on any Distribution Date prior to the payment in full of
the Class B Certificates, the lesser of (x) the Available
Principal Collections held in the Collection Account and available
for distribution with respect to such Distribution Date minus the
portion of Available Principal Collections held in the Collection
Account and available for distribution as Class A Monthly
Principal or
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<PAGE> 27
Class B Monthly Principal on such Distribution Date and (y) the
Enhancement Surplus on such Distribution Date, provided that the
Transferor shall have elected to pay such Collateral Monthly Principal
(after giving effect to any increase in the amount held in the Cash
Collateral Account or increase in the Class D Investor Amount on such
Distribution Date); and
(ii) beginning with the Distribution Date on which the Class B
Certificates have been paid in full, the lesser of (x) the Available
Principal Collections held in the Collection Account and available for
distribution with respect to such Distribution Date minus the portion
of such Available Principal Collections applied to any Class A Monthly
Principal or Class B Monthly Principal on such Distribution Date and
(y) the Collateral Indebtedness Amount on such Distribution Date.
(d) The amount of monthly principal ("Class D Monthly Principal")
distributable with respect to the Class D Certificates on each Distribution
Date, beginning with the Distribution Date on which the Collateral Indebtedness
Amount has been paid in full, or prior thereto subject to satisfaction of the
requirements of the Loan Agreement (and p rovided that such distribution would
not require the Transferor to designate a Minimum Transferor Interest Percentage
in accordance with Section C hereof, shall be equal to the least of (x) the
Available Principal Collections held in the Collection Account with respect to
such Distribution Date minus the amount portion of such Available Principal
Collections applied to any Class A Monthly Principal, Class B Monthly Principal
or Collateral Monthly Principal on such Distribution Date, (y) the Enhancement
Surplus on such Distribution Date and (z) the Class D Investor Amount on such
Distribution Date.
SECTION 4.5 REQUIRED AMOUNTS.
(a) On each Determination Date, the Servicer shall determine the
amount (the "Class A Required Amount"), if any, by which (x) the sum of (i)
Class A Monthly Interest for the following Distribution Date, (ii) any Class A
Monthly Interest previously due but not paid to the Class A Certificateholders
on a prior Distribution Date, (iii) any Class A Additional Interest for the
following Distribution Date and any Class A Additional Interest previously due
but not paid to Class A Certificateholders on a prior Distribution Date, (iv)
the Class A Allocable Amount, if any, for such Distribution Date and (v) if
Proffitt's, Inc. is no longer the Servicer, the Class A Servicing Fee for the
related Distribution Date and the amount of any Class A Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date exceeds (y)
the Class A Available Funds with respect to the preceding Monthly Period. In the
event that the Class A Required Amount for such Distribution Date is greater
than zero, the Servicer shall give written notice to the Trustee of such
positive Class A Required Amount on the date of computation and all or a portion
of the Excess Spread and the Shared Excess Finance Charge Collections allocable
to Series 1997-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period in an amount equal to the Class A Required Amount for such
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<PAGE> 28
Distribution Date shall be distributed from the Collection Account on
such Distribution Date pursuant to Section 4.8(a). In the event that the Class
A Required Amount for such Distribution Date exceeds the amount of the Excess
Spread and the Shared Excess Finance Charge Collections allocable to Series
1997-2 with respect to the related Monthly Period, all or a portion of the
Available Cash Collateral Amount with respect to such Distribution Date in an
amount equal to such excess shall be applied to fund the Class A Required
Amount. In the event that the Class A Required Amount for such Distribution
Date exceeds the amount of the Excess Spread, the Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the related Monthly
Period and the Available Cash Collateral Amount with respect to such
Distribution Date, all or a portion of the Reallocated Principal Collections
with respect to such Monthly Period in an amount equal to such excess shall be
distributed from the Collection Account on such Distribution Date pursuant to
Section 4.9(a).
(b) On each Determination Date, the Servicer shall determine the
amount (the "Class B Required Amount"), if any, equal to the sum of (x) the
amount, if any, by which the sum of (i) Class B Monthly Interest for the
following Distribution Date, (ii) any Class B Monthly Interest previously due
but not paid to the Class B Certificateholders on a prior Distribution Date,
(iii) any Class B Additional Interest for the following Distribution Date and
any Class B Additional Interest previously due but not paid to Class B
Certificateholders on a prior Distribution Date and (iv) if Proffitt's, Inc. is
no longer the Servicer, the Class B Servicing Fee for the related Distribution
Date and the amount of any Class B Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date exceeds Class B
Available Funds with respect to the preceding Monthly Period and (y) the amount,
if any, by which the Class B Allocable Amount, if any, for such Distribution
Date exceeds the amount available to make payments with respect thereto pursuant
to Section 4.8(d). In the event that the Class B Required Amount for such
Distribution Date is greater than zero, the Servicer shall give written notice
to the Trustee of such positive Class B Required Amount on the date of
computation and all or a portion of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1997-2 pursuant to Section 4.1(i)
with respect to the related Monthly Period shall be distributed from the
Collection Account on such Distribution Date pursuant to Sections 4.8(c) and
(d). In the event that the Class B Required Amount for such Distribution Date
exceeds such amounts distributed pursuant to Sections 4.8(c) and (d), all or a
portion of the Available Cash Collateral Amount with respect to such
Distribution Date (other than that portion of the Available Cash Collateral
Amount applied to fund the amounts described in Sections 4.8(a) and (b) with
respect to such Distribution Date) in an amount equal to such excess shall be
applied to fund the Class B Required Amount. In the event that the Class B
Required Amount for such Distribution Date exceeds such portion of the Available
Cash Collateral Amount and the amounts distributed pursuant to Sections 4.8(c)
and (d), all or a portion of the Reallocated Principal Collections with respect
to such Monthly Period (other than the portion of the Reallocated Principal
Collections applied to fund the Class A Required Amount and other than Class B
Subordinated Principal Collections) in an amount equal to such excess shall
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<PAGE> 29
be distributed from the Collection Account on such Distribution Date pursuant
to Section 4.9(b).
(c) On each Determination Date, the Servicer shall determine the
amount (the "Collateral Required Amount"), if any, equal to the sum of (x) the
amount, if any, by which the sum of (i) Collateral Monthly Interest for the
following Distribution Date, (ii) any Collateral Monthly Interest previously due
but not paid to the Collateral Indebtedness Holder on a prior Distribution Date,
(iii) any Collateral Additional Interest for the following Distribution Date and
any Collateral Additional Interest previously due but not paid to the Collateral
Indebtedness Holder on a prior Distribution Date and (iv) if Proffitt's, Inc. is
no longer the Servicer, the Collateral Servicing Fee for the related
Distribution Date and the amount of any Collateral Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date exceeds the
amount available to make payments with respect thereto pursuant to Sections
4.6(c)(i) and 4.8(f) with respect to the preceding Monthly Period and (y) the
amount, if any, by which the Collateral Allocable Amount, if any, for such
Distribution Date exceeds the amount available to make payments with respect
thereto pursuant to Section 4.8(h). In the event that the Collateral Required
Amount for such Distribution Date is greater than zero, the Servicer shall give
written notice to the Trustee of such positive Collateral Required Amount on the
date of computation and all or a portion of the Available Cash Collateral Amount
with respect to such Distribution Date (other than that portion of the Available
Cash Collateral Amount applied to fund the amounts described in Sections 4.8(a),
(b), (c) (d) and (e) with respect to such Distribution Date) in an amount equal
to such excess shall be applied to fund the Collateral Required Amount. In the
event that the Collateral Required Amount for such Distribution Date exceeds the
portion of the Available Cash Collateral Amount with respect to such
Distribution Date not used to fund the amounts described in Sections 4.8(a),
(b), (c), (d) and (e) with respect to such Distribution Date, all or a portion
of the Reallocated Principal Collections with respect to such Monthly Period
(other than the portion of the Reallocated Principal Collections applied to fund
the Class A Required Amount or the Class B Required Amount and other than Class
B Subordinated Principal Collections or Collateral Subordinated Principal
Collections) in an amount equal to such excess shall be distributed from the
Collection Account on such Distribution Date pursuant to Section 4.9(c).
SECTION 4.6 APPLICATION OF CLASS A AVAILABLE FUNDS, CLASS B AVAILABLE
FUNDS, COLLATERAL AVAILABLE FUNDS, CLASS D AVAILABLE FUNDS AND COLLECTIONS OF
PRINCIPAL RECEIVABLES.
The Servicer shall apply or shall instruct the Trustee to apply, on each
Distribution Date, Class A Available Funds, Class B Available Funds, Collateral
Available Funds, Class D Available Funds and Collections of Principal
Receivables allocable to Series 1997-2 held in the Collection Account with
respect to the Monthly Period immediately preceding such Distribuiton Date to
make the following distributions:
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<PAGE> 30
(a) On each Distribution Date, Class A Available Funds with respect
to the Monthly Period immediately preceding such Distribution Date shall be
distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to Class A Certificateholders on a prior
Distribution Date, plus the amount of any Class A Additional Interest
for such Distribution Date and any Class A Additional Interest
previously due but not distributed to Class A Certificateholders on a
prior Distribution Date, shall be distributed to the Paying Agent for
payment to the Class A Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Class A Servicing Fee for such Distribution
Date, plus the amount of any Class A Servicing Fee previously due but
not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer;
(iii) an amount equal to the Class A Allocable Amount
for such Distribution Date shall be treated as a portion of
Collections of Principal Receivables allocable to Series 1997-2 for
such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.8.
(b) On each Distribution Date, Class B Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) an amount equal to the Class B Monthly Interest for such
Distribution Date plus the amount of any Class B Monthly Interest
previously due but not distributed to Class B Certificateholders on a
prior Distribution Date, plus the amount of any Class B Additional
Interest for such Distribution Date and any Class B Additional
Interest previously due but not distributed to Class B
Certificateholders on a prior Distribution Date, shall be distributed
to the Paying Agent for payment to the Class B Certificateholders;
(ii) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Class B Servicing Fee for such Distribution
Date, plus the amount of any Class B Servicing Fee previously due but
not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.8.
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<PAGE> 31
(c) On each Distribution Date, Collateral Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an
amount equal to the Collateral Servicing Fee for such
Distribution Date, plus the amount of any Collateral Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, shall be distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.8.
(d) On each Distribution Date, Class D Available Funds with
respect to the Monthly Period immediately preceding such Distribution Date
shall be applied in the following priority:
(i) if Proffitt's, Inc. is no longer the Servicer, an amount
equal to the Class D Servicing Fee for such Distribution Date,
plus the amount of any Class D Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed as set forth in Section 4.8.
(e) On each Distribution Date with respect to the Revolving
Period, all such Available Principal Collections (after giving effect to any
reallocation thereof pursuant to Section 4.9), shall be applied in the
following priority:
(i) an amount equal to Collateral Monthly Principal for such
Distribution Date shall be applied in accordance with the Loan
Agreement;
(ii) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(iii) the balance, if any, shall be treated as "Shared
Principal Collections" with respect to Group One to be applied in
accordance with Section 4.1(h) (and be retained in the Excess Funding
Account if required by such provision).
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<PAGE> 32
(f) On each Distribution Date following the commencement of an
Amortization Period, all such Available Principal Collections shall be applied
in the following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date shall, during the Class A Accumulation Period, be
deposited in the Principal Account for payment to Class A
Certificateholders on the earlier to occur of the Class A Expected
Payment Date or the first Special Distribution Date or, during the
Rapid Amortization Period, be distributed to the Paying Agent for
payment to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date shall, during the Class B Accumulation
Period, be deposited in the Principal Account for payment to Class B
Certificateholders on the earlier to occur of the Class B Expected
Payment Date or the first Special Distribution Date or, during the
Rapid Amortization Period, be distributed to the Paying Agent for
payment to the Class B Certificateholders;
(iii) an amount equal to Collateral Monthly Principal for
such Distribution Date shall be applied in accordance with the
Loan Agreement;
(iv) an amount equal to Class D Monthly Principal for such
Distribution Date shall be distributed to the Paying Agent for
payment to the Class D Certificateholders; and
(v) the balance, if any, shall be treated as "Shared
Principal Collections" as provided in Section 4.1(h) and allocated
among each Series in Group One as specified in each Supplement for
Series included in Group One.
SECTION 4.7 DEFAULTED AMOUNTS; ADJUSTMENT AMOUNTS; INVESTOR CHARGE OS;
REDUCTIONS OF ADJUSTMENT AMOUNTS.
(a) On each Determination Date, the Servicer shall calculate
the Class A Required Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class A Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to such
Distribution Date, (y) the Available Cash Collateral Amount with respect to such
Distribution Date and (z) the amount of Reallocated Principal Collections
available pursuant to Section 4.9(a) with respect to the preceding Monthly
Period, the Class D Investor Amount (after giving effect to any reduction
thereof pursuant to Section 4.7(d)) shall be reduced by the amount of such
excess, but not by more than the excess of the Class A Allocable Amount for such
Distribution Date over the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class A
Allocable Amount for such Distribution Date. In the
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<PAGE> 33
event that such reduction would cause the Class D Investor Amount to be a
negative number, the Class D Investor Amount shall be reduced to zero and the
Collateral Indebtedness Amount (after giving effect to any reduction thereof
pursuant to Section 4.7(c)) shall be reduced by the amount by which the Class D
Investor Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Allocable Amount for such Distribution Date over
the amount of such reduction, if any, of the Class D Investor Amount with
respect to such Distribution Date and the amount of Excess Spread and Shared
Excess Finance Charge Collections, the amount withdrawn from the Cash Collateral
Account and the amount of Reallocated Principal Collections used to fund the
Class A Allocable Amount for such Distribution Date. In the event that such
reduction would cause the Collateral Indebtedness Amount to be a negative
number, the Collateral Indebtedness Amount shall be reduced to zero and the
Class B Investor Amount (after giving effect to any reduction thereof pursuant
to Section 4.7(b)) shall be reduced by the amount by which the Collateral
Indebtedness Amount would have been reduced below zero, but not by more than the
excess, if any, of the Class A Allocable Amount for such Distribution Date over
the aggregate amount of the reductions, if any, of the Collateral Indebtedness
Amount and the Class D Investor Amount with respect to such Distribution Date
and the amount of Excess Spread and Shared Excess Finance Charge Collections,
the amount withdrawn from the Cash Collateral Account and the amount of
Reallocated Principal Collections used to fund the Class A Allocable Amount for
such Distribution Date. In the event that such reduction would cause the Class B
Investor Amount to be a negative number, the Class B Investor Amount shall be
reduced to zero, and the Class A Investor Amount shall be reduced by the amount
by which the Class B Investor Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Allocable Amount for such
Distribution Date over the aggregate amount of the reductions, if any, of the
Class D Investor Amount, the Collateral Indebtedness Amount and the Class B
Investor Amount for such Distribution Date and the amount of Excess Spread and
Shared Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount of Reallocated Principal Collections used to
fund the Class A Investor Allocable Amount for such Distribution Date (a "Class
A Investor Charge Off"). Class A Investor Charge Offs shall thereafter be
reimbursed and the Class A Investor Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class A Investor Charge Offs) on any
Distribution Date by (i) the amount of Excess Spread and Shared Excess Finance
Charge Collections allocated and available for that purpose pursuant to Section
4.8(b), and (ii) without duplication, the aggregate amount of the reductions of
the Series Adjustment Amounts allocable to the Class A Investor Amount pursuant
to Section 4.7(f).
(b) On each Determination Date, the Servicer shall calculate
the Class B Required Amount, if any, for the related Distribution Date. If, on
any Distribution Date, the Class B Required Amount for such Distribution Date
exceeds the sum of (x) the amount of the Excess Spread and the Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to such
Distribution Date which are not used to fund the Class A Required Amount and
Class A Investor Charge Offs on the related Distribution Date, (y) the portion,
if any, of the Available Cash Collateral Amount which is remaining
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<PAGE> 34
after applying the Available Cash Collateral Amount to fund the Class A
Required Amount with respect to such Distribution Date and (z) the amount of
Reallocated Principal Collections which are available to fund the Class B
Required Amount on such Distribution Date pursuant to Section 4.9(b), then the
Class D Investor Amount (after giving effect to any reduction thereof pursuant
to Sections 4.7(a) and (d)) shall be reduced by the amount of such excess, but
not by more than the excess of the Class B Allocable Amount for such
Distribution Date over the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class B
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Class D Investor Amount to be a negative number, the Class D
Investor Amount shall be reduced to zero, and the Collateral Indebtedness
Amount (after giving effect to any reduction thereof pursuant to Sections
4.7(a) and (c)) shall be reduced by the amount by which the Class D Investor
Amount would have been reduced below zero, but not by more than the excess, if
any, of the Class B Allocable Amount for such Distribution Date over the amount
of the reductions, if any, of the Class D Investor Amount with respect to such
Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class B
Allocable Amount for such Distribution Date. In the event that such reduction
would cause the Collateral Indebtedness Amount to be a negative number, the
Collateral Indebtedness Amount shall be reduced to zero, and the Class B
Investor Amount shall be reduced by the amount by which the Collateral
Indebtedness Amount would have been reduced below zero, but not by more than
the excess, if any, of the Class B Allocable Amount for such Distribution Date
over the aggregate amount of the reductions, if any, of the Collateral
Indebtedness Amount and the Class D Investor Amount with respect to such
Distribution Date and the amount of Excess Spread and Shared Excess Finance
Charge Collections, the amount withdrawn from the Cash Collateral Account and
the amount of Reallocated Principal Collections used to fund the Class B
Allocable Amount for such Distribution Date (a "Class B Investor Charge Off").
Class B Investor Charge Offs shall thereafter be reimbursed and the Class B
Investor Amount increased (but not by an amount in excess of the aggregate
unreimbursed Class B Investor Charge Offs) on any Distribution Date by (i) the
amount of Excess Spread and Shared Excess Finance Charge Collections allocated
and available for that purpose pursuant to Section 4.8(e), and (ii) without
duplication, the aggregate amount of the reductions of the Series Adjustment
Amounts allocable to the Class B Investor Amount pursuant to Section 4.7(f).
(c) If, on any Distribution Date, the Collateral Allocable
Amount exceeds the amount of Excess Spread and Shared Excess Finance Charge
Collections available to fund the Collateral Allocable Amount pursuant to
Section 4.8(h) on such Distribution Date, then the Class D Investor Amount
(after giving effect to any reduction thereof pursuant to Sections 4.7(a), (b)
and (d)) shall be reduced by the amount of such excess. In the event that such
reduction would cause the Class D Investor Amount to be a negative number, the
Class D Investor Amount shall be reduced to zero, and the Collateral
Indebtedness Amount shall be reduced by the amount by which the
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Class D Investor Amount would have been reduced below zero; provided, however,
that the Collateral Indebtedness Amount shall not be reduced below zero (a
"Collateral Indebtedness Charge Off"). Collateral Indebtedness Charge Offs shall
thereafter be reimbursed and the Collateral Indebtedness Amount increased (but
not by an amount in excess of the aggregate unreimbursed Collateral Indebtedness
Charge Offs) on any Distribution Date by (i) the amount of Excess Spread and
Shared Excess Finance Charge Collections allocated and available for that
purpose pursuant to Section 4.8(i), and (ii) without duplication, the aggregate
amount of the reductions of the Series Adjustment Amounts allocable to the
Collateral Indebtedness Amount pursuant to Section 4.7(f).
(d) If, on any Distribution Date, the Class D Allocable Amount
exceeds the amount of Excess Spread and Shared Excess Finance Charge Collections
available to fund the Class D Allocable Amount pursuant to Section 4.8(m) on
such Distribution Date, then the Class D Investor Amount shall be reduced by the
amount of such excess; provided, however, that the Class D Investor Amount shall
not be reduced below zero (a "Class D Investor Charge Off"). Class D Investor
Charge Offs shall thereafter be reimbursed and the Class D Investor Amount
increased (but not by an amount in excess of the aggregate unreimbursed Class D
Investor Charge Offs) on any Distribution Date by (i) the amount of Excess
Spread and Shared Excess Finance Charge Collections allocated and available for
that purpose pursuant to Section 4.8(n), and (ii) without duplication, the
aggregate amount of the reductions of the Series Adjustment Amounts allocable to
the Collateral Indebtedness Amount pursuant to Section 4.7(f).
(e) Whenever funds or other amounts are available hereunder in
respect of the Class A Allocable Amount, the Class B Allocable Amount, the
Collateral Allocable Amount or the Class D Allocable Amount, as the case may be,
such funds or other amounts shall be applied first to the elimination of any
deficiency resulting from Default Amounts and then to any deficiency resulting
from Series Adjustment Amounts.
(f) Any reduction of the Series Adjustment Amount for Series
1997-2 as a result of the deposit of funds into the Excess Funding Account, the
repurchase or other repayment of Investor Certificates or the increase of
Principal Receivables in the Trust shall be allocated first to the Class A
Certificates, then to the Class B Certificates, then to the Collateral
Indebtedness Interest and finally to the Class D Certificates, in each case to
the extent of any unreimbursed reduction of the Investor Amount thereof
attributable to Series Adjustment Amounts.
SECTION 4.8 EXCESS SPREAD; SHARED EXCESS FINANCE CHARGE COLLECTIONS. The
Servicer shall apply, or shall instruct the Trustee to apply, on each
Distribution Date, Excess Spread (including interest and earnings on funds held
in the Cash Collateral Account and included as Excess Spread pursuant to
Section 4.12(b)) and Shared Excess Finance Charge Collections allocable to
Series 1997-2 pursuant to Section 4.1(i) with respect to the related Monthly
Period, to make the following distributions in the following priority:
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(a) an amount up to the Class A Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to fund
any deficiency pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of
priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge Offs which have not been previously reimbursed shall be treated as a
portion of Available Principal Collections allocable to Series 1997-2 for such
Distribution Date;
(c) an amount up to the Class B Required Amount, if any, with
respect to such Distribution Date shall be distributed by the Trustee to fund
any deficiency pursuant to Sections 4.6(b)(i) and (ii), in that order of
priority;
(d) an amount equal to any remaining portion of the Class B
Required Amount for such Distribution Date shall be treated as a portion of
Available Principal Collections allocable to Series 1997-2 for such Distribution
Date;
(e) an amount equal to the aggregate amount by which the Class
B Investor Amount has been reduced pursuant to clauses (c), (d) and (e) of the
definition of "Class B Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1997-2 for such Distribution Date;
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of Collateral Monthly Interest previously due
but not distributed to the Collateral Indebtedness Holder on a prior
Distribution Date, plus the amount of Collateral Additional Interest for such
Distribution Date and any Collateral Additional Interest previously due but not
distributed to the Collateral Indebtedness Holder shall be applied in accordance
with the Loan Agreement;
(g) an amount equal to the Class A Servicing Fee, the Class B
Servicing and the Collateral Servicing Fee for such Distribution Date (or if
Proffitt's, Inc. is no longer the Servicer, the portion thereof not paid
pursuant to Section 4.6), plus the amount of any Class A Servicing Fee, Class B
Servicing Fee or Collateral Servicing Fee previously due but not distributed to
the Servicer on a prior Distribution Date, shall be distributed to the Servicer;
(h) an amount equal to the Collateral Allocable Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1997-2 for such Distribution Date;
(i) an amount equal to the aggregate amount by which the
Collateral Indebtedness Amount has been reduced pursuant to clauses (c) and (d)
of the definition of "Collateral Indebtedness Amount" (but not in excess of the
aggregate amount of such reductions which have not been previously reimbursed)
shall be treated as a
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portion of Available Principal Collections allocable to Series 1997-2 for such
Distribution Date;
(j) an amount equal to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount (without giving
effect to any deposit made on such date hereunder and after giving effect to any
payment of Collateral Monthly Principal or Class D Monthly Principal being made
on such date) shall be deposited into the Cash Collateral Account;
(k) an amount equal to Class D Monthly Interest for such
Distribution Date, plus the amount of Class D Monthly Interest previously due
but not distributed to the Class D Certificateholders on a prior Distribution
Date, plus the amount of Class D Additional Interest for such Distribution Date
and any Class D Additional Interest previously due but not distributed shall be
distributed to the Paying Agent for payment to the Class D Certificateholders;
(l) an amount equal to the Class D Servicing Fee for such
Distribution Date (or if Proffitt's, Inc. is no longer the Servicer, the portion
of the Class D Servicing Fee for such Distribution Date not paid pursuant to
Section 4.6(d)(i)), plus the amount of any Class D Servicing Fee previously due
but not distributed to the Servicer on a prior Distribution Date, shall be
distributed to the Servicer;
(m) an amount equal to the Class D Allocable Amount for such
Distribution Date shall be treated as a portion of Available Principal
Collections allocable to Series 1997-2 for such Distribution Date;
(n) an amount equal to the aggregate amount by which the Class
D Investor Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Investor Amount" (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall be
treated as a portion of Available Principal Collections allocable to Series
1997-2 for such Distribution Date;
(o) an amount equal to the aggregate of any other amounts then
due to the Collateral Indebtedness Holder pursuant to the Loan Agreement shall
be applied in accordance with the Loan Agreement;
(p) an amount equal to the excess, if any, of the Required
Reserve Account Amount over the amount held in the Reserve Account shall be
deposited into the Reserve Account; and
(q) the balance, if any, shall constitute "Shared Excess
Finance Charge Collections" with respect to Group One to be applied in
accordance with Section 4.1(i).
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SECTION 4.9 REALLOCATED PRINCIPAL COLLECTIONS. The Servicer shall apply,
or shall instruct the Trustee to apply, on each Distribution Date, Reallocated
Principal Collections (applying all Class D Subordinated Principal Collections
prior to applying any Collateral Subordinated Principal Collections, and
applying all Collateral Subordinated Principal Collections prior to applying
any Class B Subordinated Principal Collections, and applying no Class B
Subordinated Principal Collections with respect to the Class B Required Amount
pursuant to clause (b) below and applying no Class B Subordinated Principal
Collections or Collateral Subordinated Principal Collections with respect to
the Collateral Required Amount pursuant to clause (c) below) with respect to
such Distribution Date, to make the following distributions in the following
priority:
(a) an amount equal to the excess, if any, of (i) the Class A
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the related Monthly
Period and (y) the Available Cash Collateral Amount with respect to such
Distribution Date shall be distributed by the Trustee to fund any deficiency
pursuant to Sections 4.6(a)(i), (ii) and (iii), in that order of priority;
(b) an amount equal to the excess, if any, of (i) the Class B
Required Amount, if any, with respect to such Distribution Date over (ii) the
sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the related Monthly
Period available in respect of the Class B Required Amount pursuant to Section
4.8(c) and (d) on such Distribution Date and (y) the amount withdrawn from the
Cash Collateral Account in respect of the Class B Required Amount with respect
to such Distribution Date shall be distributed by the Trustee to fund any
deficiency pursuant to Sections 4.8(c) and (d), in that order of priority; and
(c) an amount equal to the excess, if any, of (i) the
Collateral Required Amount, if any, with respect to such Distribution Date over
(ii) the sum of (x) the amount of Excess Spread and Shared Excess Finance Charge
Collections allocable to Series 1997-2 with respect to the related Monthly
Period available in respect of the Collateral Required Amount pursuant to
Sections 4.8(f) and (h) on such Distribution Date and (y) the amount withdrawn
from the Cash Collateral Account in respect of the Collateral Required Amount
with respect to such Distribution Date shall be distributed by the Trustee to
fund any deficiency pursuant to Section 4.6(c)(i) and Sections 4.8(f) and (h),
in that order of priority.
SECTION 4.10 PRINCIPAL SHORTFALL. The "Principal Shortfall" for Series
1997-2 shall be equal to (a) for any Distribution Date with respect to the
Revolving Period zero, or such higher amount designated by the Servicer in an
Officer's Certificate, (b) for any Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Payment Date), the
excess, if any, of the Controlled Deposit Amount with respect to such
Distribution Date over the amount of Available Principal Collections for
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such Distribution Date (excluding any portion thereof attributable to Shared
Principal Collections, (c) for each Distribution Date with respect to a Rapid
Amortization Period, unless and until the Class A Investor Amount and the Class
B Investor Amount shall have been paid in full, the excess, if any, of the
Class A Investor Amount and the Class B Investor Amount over the amount of
Available Principal Collections for such Distribution Date (excluding any
portion thereof attributable to Shared Principal Collections) and (d) for each
Distribution Date after the Class A Investor Amount and the Class B Investor
Amount have been paid in full, the excess, if any, of the Investor Amount over
the amount of Available Principal Collections for such Distribution Date, or
such lesser amount designated by the Servicer.
SECTION 4.11 FINANCE CHARGE SHORTFALL. The "Finance Charge Shortfall" for
Series 1997-2 for any Distribution Date shall be equal to the excess, if any,
of (a) the full amount required to be paid, without duplication, pursuant to
Sections 4.6(a), 4.6(b), 4.6(c) and 4.6(d) and Sections 4.8 (a)-(o) on such
Distribution Date over (b) the Investor Percentage of Collections of Finance
Charge Receivables with respect to the related Monthly Period.
SECTION 4.12 CASH COLLATERAL ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1997-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Cash Collateral
Account"), bearing a designation clearly indicating that the funds held therein
are held for the benefit of the Series 1997-2 Certificateholders. The Cash
Collateral Account shall initially be established with the Trustee. The Trustee
shall possess all right, title and interest in all funds held from time to time
in the Cash Collateral Account and in all proceeds thereof. The Cash Collateral
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Series 1997-2 Certificateholders. If, at any time, the
institution holding the Cash Collateral Account ceases to be a Qualified
Institution, the Trustee (or the Servicer on its behalf) shall within five (5)
Business Days establish a new Cash Collateral Account meeting the conditions
specified above with a Qualified Institution and shall transfer any cash and/or
any investments to such new Cash Collateral Account. The Trustee, at the
direction of the Servicer, shall make deposits to and withdrawals from the Cash
Collateral Account in the amounts and at the times set forth in this Agreement
and the Loan Agreement. All withdrawals from the Cash Collateral Account shall
be made in the priority set forth below. The interest of the Collateral
Indebtedness Holder in the Cash Collateral Account shall be subordinated to the
interests of the Class A Certificateholders and the Class B Certificateholders
as provided herein and in the Loan Agreement. The Collateral Indebtedness
Holder shall not be entitled to reimbursement from the Trust Property for any
withdrawals from the Cash Collateral Account except as specifically provided in
this Agreement and the Loan Agreement.
(b) Funds held in the Cash Collateral Account shall be invested
at the direction of the Servicer by the Trustee in Permitted Investments. Funds
held in the
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Cash Collateral Account on any Distribution Date, after giving effect to any
withdrawals from the Cash Collateral Account on such Distribution Date, shall
be invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. No
Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1997-2 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
The proceeds of any such investments shall be invested in such investments that
will mature so that such funds will be available for withdrawal on or prior to
the Distribution Date immediately following the date of such investment. The
Trustee shall maintain for the benefit of the Series 1997-2 Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. On each Distribution Date, all interest and earnings (net
of losses and investment expenses) on funds held in the Cash Collateral Account
shall be treated as a portion of Excess Spread for such Distribution Date and
applied in accordance with Section 4.8.
(c) On each Determination Date, the Servicer shall calculate
the amount (the "Required Draw Amount") by which the amounts specified in
clauses (a) through (f) and clause (h) of Section 4.8 with respect to the
related Distribution Date exceed the amount of Excess Spread and Shared Excess
Finance Charge Collections allocable to Series 1997-2 with respect to the
related Monthly Period available to pay such specified amounts. In the event
that for any Distribution Date the Required Draw Amount is greater than zero,
the Servicer shall give written notice to the Trustee of such positive Required
Draw Amount on the related Determination Date. On the Distribution Date, the
Required Draw Amount, if any, up to the Available Cash Collateral Amount, shall
be withdrawn from the Cash Collateral Account and distributed to fund any
deficiency pursuant to clauses (a) through (f) and clause (h) of Section 4.8 (in
the order of priority set forth in Section 4.8).
(d) In the event that the Cash Enhancement Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Cash Collateral Account and all payments of principal to Series 1997-2
Certificateholders with respect to such Distribution Date, is greater than zero,
the Trustee, acting in accordance with the instructions of the Servicer, shall
withdraw from the Cash Collateral Account, and pay to the Transferor, an amount
equal to such Cash Enhancement Surplus; provided, however, that the Transferor,
at its option, to be exercised in its sole discretion, may instruct the Servicer
not to instruct the Trustee to withdraw such Cash Enhancement Surplus (or any
portion thereof), in which event the Trustee shall not withdraw such Cash
Enhancement Surplus (or portion thereof) from the Cash Collateral Account.
SECTION 4.13 PRINCIPAL ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1997-2 Certificateholders, with a
Qualified Institution
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a segregated trust account (the "Principal Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Series 1997-2 Certificateholders. The Principal Account shall initially be
established with the Trustee. The Trustee shall possess all right, title and
interest in all funds held from time to time in the Principal Account and in all
proceeds thereof. The Principal Account shall be under the sole dominion and
control of the Trustee for the benefit of the Series 1997-2 Certificateholders.
If, at any time, the institution holding the Principal Account ceases to be a
Qualified Institution, the Trustee (or the Servicer on its behalf) shall within
five (5) Business Days establish a new Principal Account meeting the conditions
specified above with a Qualified Institution and shall transfer any cash and/or
any investments to such new Principal Account. Pursuant to the authority granted
to the Servicer in Section 3.1(b) of the Agreement, the Servicer shall have the
power, revocable by the Trustee, to make withdrawals and payments or to instruct
the Trustee to make withdrawals and payments from the Principal Account for the
purposes of carrying out the Servicer's or the Trustee's duties hereunder.
(b) Funds held in the Principal Account shall be invested at
the direction of the Servicer by the Trustee in Permitted Investments. All such
Permitted Investments shall be held by the Trustee for the benefit of the Series
1997-2 Certificateholders; provided, however, that on each Distribution Date all
interest and other investment income (net of losses and investment expenses)
("Principal Investment Proceeds") on funds held therein shall be applied as set
forth in Section 4.13(c) below. Funds held in the Principal Account shall be
invested in Permitted Investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. No
Permitted Investment shall be disposed of prior to its maturity; provided,
however, that the Trustee may sell, liquidate or dispose of a Permitted
Investment before its maturity, if so directed by the Servicer, the Servicer
having reasonably determined that the interest of the 1997-2 Certificateholders
may be adversely affected if such Permitted Investment is held to its maturity.
(c) On each Distribution Date with respect to the Accumulation
Period, the Servicer shall direct the Trustee to withdraw from the Principal
Account and deposit into the Collection Account all Principal Investment
Proceeds then held in the Principal Account and such Principal Investment
Proceeds shall be treated as a portion of (x) prior to the payment in full of
the Class A Investor Amount, Class A Available Funds and (y) thereafter, Class
B Available Funds, in each case for such Distribution Date.
(d) Reinvested interest and other investment income on funds
deposited in the Principal Account shall not be considered to be principal
amounts held therein for purposes of this Agreement.
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SECTION 4.14 RESERVE ACCOUNT.
(a) The Servicer shall establish and maintain, in the name of
the Trustee, for the benefit of the Series 1997-2 Certificateholders, with a
Qualified Institution a segregated trust account (the "Reserve Account"),
bearing a designation clearly indicating that the funds deposited therein are
held for the benefit of the Series 1997-2 Certificateholders. The Reserve
Account shall initially be established with the Trustee. The Trustee shall
possess all right, title and interest in all funds held from time to time in the
Reserve Account and in all proceeds thereof. The Reserve Account shall be under
the sole dominion and control of the Trustee for the benefit of the Series
1997-2 Certificateholders. If at any time the institution holding the Reserve
Account ceases to be a Qualified Institution, the Trustee (or the Servicer on
its behalf) shall within five (5) Business Days establish a new Reserve Account
meeting the conditions specified above with a Qualified Institution, and shall
transfer any cash and/or any investments to such new Reserve Account. The
Trustee, at the direction of the Servicer, shall (i) make withdrawals from the
Reserve Account from time to time in an amount up to the Available Reserve
Account Amount at such time, for the purposes set forth in this Agreement, and
(ii) on each Distribution Date (from and after the Reserve Account Funding Date)
prior to the termination of the Reserve Account shall make a deposit into the
Reserve Account in the amount specified in, and otherwise in accordance with,
Section 4.8(p).
(b) Funds held in the Reserve Account shall be invested at the
direction of the Servicer by the Trustee in Permitted Investments. Funds held in
the Reserve Account on any Distribution Date, after giving effect to any
withdrawals from the Reserve Account on such Distribution Date, shall be
invested in such investments that will mature so that such funds will be
available for withdrawal on or prior to the following Distribution Date. The
Trustee shall maintain for the benefit of the Series 1997-2 Certificateholders
possession of the negotiable instruments or securities, if any, evidencing such
Permitted Investments. No Permitted Investment shall be disposed of prior to
its maturity; provided, however, that the Trustee may sell, liquidate or
dispose of an Permitted Investment before its maturity, if so directed by the
Servicer, the Servicer having reasonably determined that the interest of
the Series 1997-2 Certificateholders may be adversely affected if such
Permitted Investment is held to its maturity. On each Distribution Date, all
interest and earnings (net of losses and investment expenses) on funds held in
the Reserve Account shall be retained in the Reserve Account (to the extent
that the Available Reserve Account Amount is less than the Required Reserve
Amount) and the balance, if any, shall be deposited in the Collection Account
and treated as a portion of (x) until the payment in full of the Class A
Investor Amount, Class A Available Funds and (y) thereafter, Class B Available
Funds, in each case for such Distribution Date. For purposes of determining
the availability of funds or the balance in the Reserve Account for any reason
under this Agreement, except as otherwise provided in the preceding sentence,
investment earnings on such funds shall be deemed not to be available or held.
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(c) On the Determination Date preceding each Distribution Date
with respect to the Accumulation Period (prior to the Class B Expected Payment
Date) and the first Special Distribution Date, the Servicer shall calculate the
"Reserve Draw Amount" which shall be equal to the excess, if any, of the Covered
Amount with respect to such Distribution Date or Special Distribution Date over
the Principal Investment Proceeds with respect to such Distribution Date or
Special Distribution Date.
(d) In the event that for any Distribution Date the Reserve
Draw Amount is greater than zero, the Reserve Draw Amount, up to the Available
Reserve Account Amount, shall be withdrawn from the Reserve Account on such
Distribution Date by the Trustee (acting in accordance with the instructions of
the Servicer), deposited into the Collection Account and included in (i) until
the payment in full of the Class A Investor Amount, Class A Available Funds and
(ii) thereafter, Class B Available Funds, in each case for such Distribution
Date.
(e) In the event that the Reserve Account Surplus on any
Distribution Date, after giving effect to all deposits to and withdrawals from
the Reserve Account with respect to such Distribution Date, is greater than
zero, the Trustee, acting in accordance with the instructions of the Servicer,
shall withdraw from the Reserve Account, and pay an amount equal to such Reserve
Account Surplus.
(f) Upon the earliest to occur of (i) the termination of the
Trust pursuant to Article XII of the Agreement, (ii) the day on which the Class
A Investor Amount and Class B Investor Amount have been paid in full, (iii) if
the Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to Series 1997-2 and (iv) if the Accumulation Period has commenced,
the earlier of the first Special Distribution Date and the Class B Expected
Payment Date, the Trustee, acting in accordance with the instructions of the
Servicer, after the prior payment of all amounts owing to the Series 1997-2
Certificateholders which are payable from the Reserve Account as provided
herein, shall withdraw from the Reserve Account and pay in accordance with the
Loan Agreement all amounts, if any, held in the Reserve Account, and the Reserve
Account shall be deemed to have terminated for all purposes of the Agreement.
SECTION 4.15 POSTPONEMENT OF ACCUMULATION PERIOD. The Accumulation Period
is scheduled to commence at the end of the day on the last day of the ______
Monthly Period; provided, however, that, if the Accumulation Period Length
(determined as described below) shall be less than 12 months, the date on which
the Accumulation Period actually commences may, at the option of the
Transferor, be delayed to the first day of any month that is a number of whole
months prior to the Class A
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Expected Payment Date at least equal to the Accumulation Period Length and, as a
result, the number of Monthly Periods in the Accumulation Period shall at least
equal the Accumulation Period Length. On each Determination Date until the
Accumulation Period begins, the Servicer shall determine the "Accumulation
Period Length," which shall equal the number of whole months such that the sum
of the Accumulation Period Factors for each month during such period will be
equal to or greater than the Required Accumulation Factor Number; provided,
however, that the Accumulation Period Length shall not be determined to be less
than one month.
SECTION 4.16 ADDITIONAL ISSUANCES OF CLASS D CERTIFICATES.
(a) On any day in the Revolving Period, the Trustee shall issue
to the Transferor for execution, upon the Transferor's request, and the Trustee
shall authenticate and deliver, in accordance with the Transferor's
instructions, an additional principal amount of Class D Certificates
("Additional Class D Certificates") as provided below.
(b) Additional Class D Certificates may be issued, executed and
delivered upon satisfaction of the following conditions:
(i) after giving effect to the issuance of such Additional
Class D Certificates, the Transferor Amount shall be at least
equal to the Minimum Transferor Amount and the Aggregate
Principal Receivables shall be at least equal to the Minimum
Aggregate Principal Receivables;
(ii) the Transferor shall have given notice by 10:00 A.M.,
New York City time, on the date such Additional Class D
Certificates are to be issued to the Trustee, the Paying Agent,
the Servicer and the Collateral Indebtedness Holder of the
proposed issuance of such Additional Class D Certificates;
(iii) on or before the date on which such Additional Class
D Certificates are issued, the Transferor shall have delivered an
Opinion of Counsel addressed to the Trustee, dated the date of
such issuance, to the effect that such issuance will not
adversely affect the tax characterization as debt of Investor
Certificates of any outstanding Series or Class with respect to
which an Opinion of Counsel addressed to the Trustee was
delivered at the time of their issuance that such Investor
Certificates would be characterized as debt, cause the Trust to
be classified, for federal income tax purposes, as an association
(or publicly
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traded partnership) taxable as a corporation, and cause or
constitute an event in which gain or loss would be recognized by
any Certificateholder; and
(iv) on or before the date such Additional Class D
Certificates are issued, the Transferor shall deliver to the
Trustee an Officer's Certificate confirming the matters set forth
in clause (i) above. The Trustee may conclusively rely on such
certificate, shall have no duty to make inquiries with regard to
matters set forth therein and shall incur no liability in so
relying.
SECTION I. ARTICLE V OF THE AGREEMENT. Article V of the
Agreement as it relates to Series 1997-2 shall read in its entirety as follows:
ARTICLE V
DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS
SECTION 5.1 DISTRIBUTIONS.
(a) On each Determination Date, the Servicer shall deliver to
the Trustee and Paying Agent a certificate substantially in the form of Exhibit
B prepared by the Servicer. The Trustee shall be under no duty to recalculate,
verify or recompute the information on such certificate.
(b) On each Distribution Date, the Paying Agent shall
distribute to each Class A Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class A Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class A
Certificates pursuant to this Agreement.
(c) On the Class A Expected Payment Date and each Special
Distribution Date, the Paying Agent shall distribute to each Class A
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class A
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class A Certificates pursuant to this Agreement.
(d) On each Distribution Date, the Paying Agent shall
distribute to each Class B Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class B Certificateholder's
- 44 -
<PAGE> 46
pro rata share of the amounts that are available on such Distribution Date to
pay interest on the Class B Certificates pursuant to this Agreement.
(e) On the Class B Expected Final Distribution Date and each
Special Distribution Date, the Paying Agent shall distribute to each Class B
Certificateholder of record as of the preceding Record Date (other than as
provided in Section 12.2 respecting a final distribution) such Class B
Certificateholder's pro rata share of the amounts that are available on such
date to pay principal of the Class B Certificates pursuant to this Agreement.
(f) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such Distribution Date to pay interest on the Class D
Certificates pursuant to this Agreement.
(g) On each Distribution Date, the Paying Agent shall
distribute to each Class D Certificateholder of record as of the preceding
Record Date (other than as provided in Section 12.2 respecting a final
distribution) such Class D Certificateholder's pro rata share of the amounts
that are available on such date to pay principal of the Class D Certificates
pursuant to this Agreement.
(h) Except as provided in Section 12.2 with respect to a final
distribution and Section 5.3 with respect to payments to the Collateral
Indebtedness Holder, distributions to Series 1997-2 Certificateholders
hereunder shall be made by check mailed to each such Certificateholder at such
Certificateholder's address appearing in the Certificate Register without
presentation or surrender of any such Series 1997-2 Certificate or the making
of any notation thereon; provided, however, that with respect to such
Certificates registered in the name of a Clearing Agency, such distributions
shall be made to such Clearing Agency in immediately available funds.
SECTION 5.2 STATEMENTS TO SERIES 1997-2 CERTIFICATEHOLDERS. On each
Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to
each Series 1997-2 Certificateholder, including, for the avoidance of doubt,
the Collateral Indebtedness Holder, a statement substantially in the form of
Exhibit C prepared by the Servicer setting forth certain information relating
to the Trust and the Series 1997-2 Certificates.
On or before June 30 of each calendar year, beginning with 1998, the
Paying Agent, on behalf of the Trustee, shall furnish or cause to be furnished
to each Person who at any time during the preceding calendar year was a Series
1997-2 Certificateholder a statement prepared by the Servicer containing the
information which is required to be contained in Exhibit C, aggregated for such
calendar year or the applicable portion thereof during which such Person was a
Certificateholder of such Series, together with other information as is
required to be provided by an issuer of indebtedness under the
- 45 -
<PAGE> 47
Code and such other customary information as is necessary to enable the
Certificateholders of such Series to prepare their tax returns. Such obligation
of the Servicer shall be deemed to have been satisfied to the extent that
substantially comparable information shall have been provided by the Paying
Agent pursuant to any requirements of the Code as from time to time in effect.
SECTION 5.3 DISTRIBUTIONS TO COLLATERAL INDEBTEDNESS HOLDER.
Notwithstanding the foregoing provisions of this Article V, amounts payable to
the Collateral Indebtedness Holder pursuant to this Series Supplement shall be
distributed in the manner provided for in the Loan Agreement.
[END OF ARTICLE V]
SECTION J. PAY OUT EVENTS. If any one of the events specified
in Section 9.1 of the Agreement or any of the following events shall occur
during either the Revolving Period or the Accumulation Period with respect to
the Series 1997-2 Certificates:
(a) failure on the part of the Transferor or the Servicer (x)
to make any payment or deposit required by the terms of the Agreement or this
Series Supplement on or before the date occurring five (5) Business Days after
the date such payment or deposit is required to be made or (y) duly to observe
or perform in any material respect any other covenants or agreements applicable
to such party set forth in the Agreement or this Series Supplement, which
failure has a material adverse effect on the Series 1997-2 Certificateholders,
and which continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the Series 1997-2 Certificateholders representing
not less than 50% of the Investor Amount, and continues to materially and
adversely affect the Series 1997-2 Certificateholders for such period;
(b) any representation or warranty made by the Transferor in
the Agreement or this Series Supplement, or information contained in a computer
file, microfiche or written list required to be delivered by the Transferor
pursuant to the Agreement, shall prove to have been incorrect in any material
respect when made or when delivered, (i) which continues to be incorrect in any
material respect for a period of 60 days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to the
Transferor by the Trustee, or to the Transferor and the Trustee by the Series
1997-2 Certificateholders representing not less than 50% of the Investor Amount,
and (ii) as a result of which the interests of the Series 1997-2
Certificateholders are materially and adversely affected and continue to be
materially and adversely affected for such period; provided, however, a Pay Out
Event shall not be deemed to have occurred if the Transferor has accepted
reassignment
- 46 -
<PAGE> 48
of the related Receivable, or all of such Receivables, if applicable, during
such period in accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields for any three (3)
consecutive Monthly Periods is less than the average Base Rate for such three
(3) Monthly Periods;
(d) the failure to pay the Class A Investor Amount on the Class
A Expected Payment Date or the failure to pay the Class B Investor Amount on the
Class B Expected Payment Date;
(e) the Transferor shall fail to designate, or be unable to
designate, Additional Accounts, the Receivables of which will be Eligible
Receivables, as required by the Agreement, and such failure shall continue for a
period of five (5) Business Days; or
(f) any Servicer Default shall occur which would have a
material adverse effect on the Series 1997-2 Certificateholders;
then, (i) in the case of any event described in clause (a), (b) or (f), after
the applicable grace period set forth in such subparagraphs, either the Trustee
or Series 1997-2 Certificateholders representing more than 50% of the Investor
Amount, by notice then given in writing to the Transferor and the Servicer (and
to the Trustee, if given by the Series 1997-2 Certificateholders) may declare
that a Pay Out Event has occurred with respect to only the Series 1997-2
Certificates as of the date of such notice and (ii) in the case of any event
described in Section 9.1 of the Agreement or in clauses (c), (d) or (e) above, a
Pay Out Event with respect to only the Series 1997-2 Certificates will be deemed
to have occurred without any notice or other action on the part of the Trustee
or the Series 1997-2 Certificateholders or all certificateholders, as
appropriate, immediately upon the occurrence of such event.
SECTION K. RESTRICTIONS ON TRANSFER.
(a) The Collateral Indebtedness Interest shall be subject to
the restrictions on transfer set forth in the Loan Agreement.
(b) The Transferor may at any time, without the consent of the
Investor Certificateholders, (i) sell or transfer all or a portion of the Class
D Certificates, provided that (A) the Transferor shall have given notice to the
Trustee, the Servicer and the Rating Agencies of such proposed sale or transfer
of the Class D Certificates at least five (5) Business Days prior to the
consummation of such sale or transfer; (B) the Rating Agency Condition shall
have been satisfied; (C) no Pay Out Event shall have occurred prior to the
consummation of such proposed sale or transfer of Class D Certificates; (D) the
Transferor shall have delivered an Officer's Certificate dated the date of the
consummation of such proposed sale or transfer to the effect that, in the
reasonable belief of the Transferor, such action will not, based on the facts
known to such officer at the
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<PAGE> 49
time of such certification, cause a Pay Out Event to occur with respect to any
Series, and (E) the Transferor shall have provided an Opinion of Counsel
addressed to the Trustee, dated the date of such certificate with respect to
such action, that such proposed sale or transfer will not adversely affect the
tax characterization as debt of Investor Certificates of any outstanding Series
or Class with respect to which an Opinion of Counsel addressed to the Trustee
was delivered at the time of their issuance that such Investor Certificates
would be characterized as debt, cause the Trust to be classified, for federal
income tax purposes, as an association (or publicly traded partnership) taxable
as a corporation and cause or constitute an event in which gain or loss would be
recognized by any Certificateholder.
(c) Each initial transferee of the Class D Certificates or any
interest therein and any assignee thereof or participant therein (each a
"holder") shall certify to the Transferor, the Servicer and the Trustee that it
has neither acquired nor will it sell, transfer, assign participate, pledge,
hypothecate, or otherwise dispose (any such act, a "transfer") of any interest
in its Class D Certificates or cause an interest in its Class D Certificates to
be marketed on or through (i) an "established securities market" within the
meaning of Section 7704(b)(1) of Code and any Treasury regulation thereunder,
including, without limitation, an over-the-counter market or an interdealer
quotation system that regularly disseminates firm buy or sell quotations or (ii)
a "secondary market" within the meaning of Section 7704(b)(2) of the Code and
any Treasury regulation thereunder, including, without limitation, a market
wherein interests in the Class D Certificates are regularly quoted by any Person
making a market in such interests and a market wherein any Person regularly
makes available bid or offer quotes with respect to interests in the Class D
Certificates and stands ready to effect buy or sell transactions at the quoted
price for itself or on behalf of others. In addition, each holder shall certify,
prior to any delivery or transfer to it of a Class D Certificate or interest
therein, that it is not and will not become a partnership, Subchapter S
corporation or grantor trust for United States federal income tax purposes. If a
holder cannot make the certification described in the preceding sentence, the
Transferor, the Trustee or the Servicer may prohibit a transfer to such entity;
provided, however, that if the Transferor, the Trustee or the Servicer agrees to
permit such a transfer, the Transferor, the Servicer or the Trustee may require
additional certifications in order to prevent the Trust from being treated as a
publicly traded partnership. Each holder acknowledges that special tax counsel
to the Transferor may render Opinions of Counsel from time to time to the
Transferor and others that the Trust will not be treated as an association or as
a publicly traded partnership taxable as a corporation, and that such Opinions
of Counsel will rely in part on the accuracy of the certifications in this
subsection K(c).
SECTION K1. TAX CHARACTERIZATION OF THE CLASS D CERTIFICATES
AND THE COLLATERAL INDEBTEDNESS INTEREST. It is the intention of the parties
hereto that the Class D Certificates and the Collateral Indebtedness Interest be
treated under applicable tax law as indebtedness. In the event that either the
Class D Certificates or the Collateral Indebtedness Interest are not so treated,
it is the intention of the parties that the Class D Certificates or the
Collateral Indebtedness Interest, as the case may be, be treated under
- 48 -
<PAGE> 50
applicable tax law as interests in a partnership that owns the Receivables. In
the event that either the Class D Certificates or the Collateral Indebtedness
Interest are treated under applicable tax law as interests in a partnership, it
is the intention of the parties that the Class D Certificates or the Collateral
Indebtedness Interest, as the case may be, be treated as guaranteed payments
and, if for any reason they are not so treated, that the holders of the Class D
Certificates or the Collateral Indebtedness Interest, as the case may be, be
specially allocated gross interest income equal to the interest accrued during
each Interest Period on the Class D Certificates and on the Collateral
Indebtedness Interest.
SECTION L. RATIFICATION OF MASTER POOLING AND SERVICING
AGREEMENT. As supplemented by this Series Supplement, the Agreement is in all
respects ratified and confirmed and the Agreement as so supplemented by this
Series Supplement shall be read, taken, and construed as one and the same
instrument; provided, however, that pursuant to Section 9.2(a) of the Agreement,
the Trustee shall sell the portion of the Receivables allocable to Series 1997-2
unless instructed not to sell, dispose of or otherwise liquidate the Receivables
by holders of interests aggregating more than 50% of each Class of each Series
(including a majority in interest in each collateral indebtedness interest),
each holder of an interest in the Transferor Interest other than the Transferor
and any other Person specified in a Supplement.
SECTION L1. FASIT ELECTION. Each Series 1997-2
Certificateholder, by acquiring an interest in a Series 1997-2 Certificate, is
deemed to consent to any amendment to the Agreement or this Series Supplement
necessary for the Transferor to elect for the Trust or any portion thereof to be
treated as a FASIT within the meaning of Section 860L of the Code (or any
successor provision thereto), provided that, such election may not be made
unless the Transferor delivers to the Trustee (i) an Opinion of Counsel to the
effect that (x) the issuance of FASIT regular interests will not adversely
affect the tax characterization as debt of Investor Certificates of any
outstanding Series or Class with respect to which an Opinion of Counsel was
delivered at the time of their issuance that such Investor Certificates would
be characterized as debt, (y) following such issuance, the Trust will not be
classified, for federal income tax purposes, as an association (or publicly
traded partnership) taxable as a corporation, and (z) such issuance will not
cause or constitute an event in which gain or loss would be recognized by any
Investor Certificateholder, and (ii) an Officer's Certificate to the effect
that such issuance will not have a material adverse effect on Investor
Certificateholders of any outstanding Series or class (viewed as a Series or a
class, as applicable).
SECTION L2. PAIRED SERIES. Subject to obtaining confirmation by
each Rating Agency of the then existing ratings of each class of Series 1997-2
Certificates which are then rated, and prior to a Pay Out Event, the Series
1997-2 Certificates may be paired with one or more other Series (each a "Paired
Series"). Each Paired Series either will be pre-funded with an initial deposit
to a pre-funding account in an amount up to the initial principal balance of
such Paired Series and primarily from the proceeds of the sale of such Paired
Series or will have a variable principal amount. Any such pre-funding account
will be held for the benefit of such Paired Series and not for the benefit of
the Series 1997-
- 49 -
<PAGE> 51
2 Certificateholders. As principal is paid with respect to the Series 1997-2
Certificates, either (i) in the case of a pre-funded Paired Series, an equal
amount of funds held in any pre-funding account for such pre-funded Paired
Series will be released (which funds will be distributed to the Transferor) or
(ii) in the case of a Paired Series having a variable principal amount, an
interest in such variable Paired Series in an equal or lesser amount may be
sold by the Trust (and the proceeds thereof will be distributed to the
Transferor) and, in either case, the invested amount in the Trust of such
Paired Series will increase by up to a corresponding amount. Upon payment in
full of the Certificates, assuming that there have been no unreimbursed charge
offs with respect to any related Paired Series, the aggregate investor amount
of such related Paired Series will have been increased by an amount up to an
aggregate amount equal to the Investor Amount paid to the Certificateholders
since the issuance of such Paired Series. The issuance of a Paired Series will
be subject to the conditions described in Section 6.9(b) of the Agreement.
SECTION M. COUNTERPARTS. This Series Supplement may be executed
in any number of counterparts (and by different parties on separate
counterparts), each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.
SECTION N. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
- 50 -
<PAGE> 52
SECTION O. SUBORDINATION OF CERTAIN TERMINATION PAYMENTS.
Notwithstanding anything contained in Section 12.2(c) of the Agreement, upon the
sale of Receivables or interests therein as provided in Section 12.2(c) of the
Agreement, the proceeds of any such sale payable in respect of the Series 1997-2
Certificates shall be payable first to the Class A Certificates until paid in
full, then to the Class B Certificates until paid in full, then to the
Collateral Indebtedness Interest until paid in full and then to the Class D
Certificates until paid in full.
IN WITNESS WHEREOF, the Transferor, the Servicer and the
Trustee have caused this Series Supplement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first above
written.
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
-----------------------------------
Name:
Title:
PROFFITT'S, INC.,
as Servicer
By:
------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By:
-------------------------------------
Name:
Title:
- 51 -
<PAGE> 53
EXHIBIT A-1
TO THE
SERIES 1997-2 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
<PAGE> 54
EXHIBIT A-1
TO THE
SERIES 1997-2 SUPPLEMENT
FORM OF CLASS A CERTIFICATE
REGISTERED $________
NO. A-1 CUSIP No. ________
Unless this Class A Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1997-2
Class A Expected Payment Date:
________, 200__Distribution Date
Each $1,000 minimum denomination represents a
_______ undivided interest
in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit Corporation
or any Affiliate thereof)
A-1-1
<PAGE> 55
This certifies that Cede & Co.(the "Class A Certificateholder")
is the registered owner of a fractional undivided interest in certain assets of
a trust (the "Trust") created pursuant to the Master Pooling and Servicing
Agreement, dated as of July _______, 1997 (as amended and supplemented, the
"Agreement"), as supplemented by the Series 1997-2 Supplement, dated as of July
__, 1997 (as amended and supplemented, the "Series Supplement"), among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as Servicer, and
Norwest Bank Minnesota, National Association, a national banking association, as
trustee (the "Trustee"). The corpus of the Trust consists of (i) receivables
(the "Receivables") generated from time to time in a portfolio of consumer
revolving credit card accounts identified under the Agreement (the "Accounts"),
(ii) all monies due or to become due in payment of the Receivables, (iii) all
proceeds of the Receivables and proceeds of Insurance Policies relating to the
Receivables, (iv) all monies held in certain accounts of the Trust (excluding
investment earnings, unless otherwise specified in the Agreement or any
Supplement), (v) all Recoveries and Collections of the Receivables, (vi) any
Enhancement with respect to any Series (or class thereof) and (vii) all other
assets and interests constituting the Trust Property. Although a summary of
certain provisions of the Agreement and the Series Supplement is set forth below
and on the Summary of Terms and Conditions attached hereto and made a part
hereof, this Class A Certificate does not purport to summarize the Agreement and
the Series Supplement and reference is made to the Agreement and the Series
Supplement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee. A copy of the Agreement and the Series Supplement
(without schedules) may be requested from the Trustee by writing to the Trustee
at Norwest Bank Minnesota, N.A., Norwest Center, Sixth and Marquette,
Minneapolis, Minnesota 55479-0070, Attention: Asset Backed Securities Corporate
Trust Department. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to them in the Agreement or the Series
Supplement, as applicable.
This Class A Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement and the Series Supplement, to
which Agreement and Series Supplement, each as amended and supplemented from
time to time, the Class A Certificateholder by virtue of the acceptance hereof
assents and is bound.
It is the intent of the Transferor and the Investor
Certificateholders (and Certificate Owners) that, for Federal, state and local
income and franchise tax purposes only, the Investor Certificates will qualify
as indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class A Certificateholder (and each
Certificate Owner of a Class A Certificate), by the acceptance of this Class A
Certificate (or its interest therein), is deemed to agree to treat this Class A
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
A-1-2
<PAGE> 56
Unless the certificate of authentication hereon has been
executed by or on behalf of the Trustee, by manual signature, this Class A
Certificate shall not be entitled to any benefit under the Agreement or the
Series Supplement or be valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class A
Certificate to be duly executed by its undersigned officer thereunto duly
authorized.
PROFFITT'S CREDIT CORPORATION
By:
--------------------------
Name:
Title:
Dated: , 1997
--------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates described in the within-mentioned
Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
-----------------------
Authorized Officer
Dated: , 1997
------------------
A-1-3
<PAGE> 57
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS A ASSET BACKED CERTIFICATE, SERIES 1997-2
Summary of Terms and Conditions
This Class A Certificate is one of a Series of Certificates entitled
"Proffitt's Credit Card Master Trust, Series 1997-2 Certificates" (the "Series
1997-2 Certificates"), and one of a class thereof entitled "Class A Asset
Backed Certificates, Series 1997-2" (the "Class A Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust. The
Trust Property is allocated in part to the Investor Certificateholders of all
outstanding Series (the "Certificateholders' Interest") and the interests, if
any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class A Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class A Investor Amount at such time. The Class A Initial
Investor Amount is $______. The Class A Investor Amount on any date will be an
amount equal to (a) the Class A Initial Investor Amount, minus (b) the
aggregate amount of principal payments made to the Class A Certificateholders
prior to such date, minus (c) the excess, if any, of the aggregate amount of
Class A Investor Charge Offs for all prior Distribution Dates over the sum of
the aggregate amount of Class A Investor Charge Offs reimbursed pursuant to the
Series Supplement and, without duplication, the aggregate amount of the
reductions of the Series Adjustment Amounts allocable to the Class A Investor
Amount pursuant to the Series Supplement prior to such date; provided, however,
that the Class A Investor Amount may not be reduced below zero. The Class A
Adjusted Investor Amount shall mean, on any date of determination while the
Class A Certificates are outstanding, an amount equal to the Class A Investor
Amount minus the Principal Account Balance (but not less than zero). In
addition, classes of the Series 1997-2 Certificates entitled "Class B Asset
Backed Certificates, Series 1997-2" (the "Class B Certificates"), "Collateral
Indebtedness Interest, Series 1997-2" (the "Collateral Indebtedness Interest")
and "Class D Asset Backed Certificates, Series 1997-2" (the "Class D
Certificates") will be issued. The Exchangeable Transferor Certificate has
been issued to Proffitt's Credit Corporation pursuant to the Agreement, which
represents the Transferor Interest.
Subject to the terms and conditions of the Agreement, the Transferor may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of Investor Certificates, and/or Additional Class D
Certificates, which will represent fractional undivided interests in certain
Trust Property.
Each Class A Certificate represents the right to receive payments of (i)
interest at the rate of ____% accruing from ________, __________, payable on
_______, _________ and on the 15th day of each month thereafter (or, if such
15th day is not a Business Day, the next succeeding Business Day) (each, a
"Distribution Date") and (ii)
A-1-4
<PAGE> 58
principal on the __________ Distribution Date (and on each Distribution Date
thereafter, if the Class A Certificates are not paid in full on the ________,
_____________ Distribution Date) or, upon the occurrence of a Pay Out Event,
on each Distribution Date relating to the Rapid Amortization Period, in each
case funded from a percentage of the payments received with respect to the
Receivables and certain other funds, all as more fully described in the
Agreement and the Series Supplement. Interest on the Class A Certificates will
be calculated on the basis of a 360-day year consisting of twelve 30-day
months.
The Class B Certificates, the Collateral Indebtedness Interest and the
Class D Certificates are subordinated to the Class A Certificates to the extent
set forth in the Series Supplement.
On each Distribution Date, the Paying Agent shall distribute to each Class
A Certificateholder of record at the close of business on the last Business Day
of the immediately preceding calendar month (each a "Record Date") such Class A
Certificateholder's pro rata share of such amounts (including amounts held in
the Principal Account) as are payable to the Class A Certificateholders
pursuant to the Agreement and the Series Supplement. Distributions with
respect to this Class A Certificate will be made by the Paying Agent by check
mailed to the address of the Class A Certificateholder of record appearing in
the Certificate Register without the presentation or surrender of this Class A
Certificate or the making of any notation thereon (except for the final
distribution in respect of this Class A Certificate), except that with respect
to Class A Certificates registered in the name of Cede & Co., as nominee for
The Depository Trust Company, distributions will be made in the form of
immediately available funds. Final payment of this Class A Certificate will be
made only upon presentation and surrender of this Class A Certificate at the
office or agency specified in the notice of final distribution delivered by the
Trustee in accordance with the Agreement and the Series Supplement.
On any Distribution Date occurring on or after the day on which the sum of
the Class A Adjusted Investor Amount, the Class B Adjusted Investor Amount, the
Collateral Indebtedness Amount and the amount of the Class D Investor Amount
held by parties other than the Transferor or any of its affiliates is less than
or equal to 10% of the sum of the Class A Investor Amount on the Closing Date,
the Class B Investor Amount on the Closing Date, the Collateral Indebtedness
Amount on the Closing Date and the highest amount of the Class D Investor
Amount held by parties other than the Transferor or any of its affiliates since
the Closing Date, the Class A Certificates are subject to optional repurchase
by the Transferor, if certain conditions set forth in the Agreement or the
Series Supplement are satisfied. The repurchase price will be equal to the
Class A Adjusted Investor Amount plus accrued but unpaid interest thereon.
Subject to certain conditions in the Agreement, if the Investor Amount is
greater than zero on the _________ Distribution Date (the "Stated Series
Termination Date"), the Trustee shall sell or cause to be sold an amount of
Receivables up to 110% of the Adjusted Investor Amount at the close of business
on such date, but not more than the
A-1-5
<PAGE> 59
total amount of Receivables allocable to the Series 1997-2 Certificates, and
apply the proceeds of such sale as provided in the Agreement and the Series
Supplement.
This Class A Certificate does not represent a recourse obligation of, or
an interest in, the Transferor, the Servicer or any Affiliate of any of them
and is not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other governmental agency or instrumentality. This Class A Certificate
is limited in right of payment to certain Collections with respect to the
Receivables (and certain other amounts), all as more specifically set forth
hereinabove and in the Agreement and the Series Supplement.
The Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to cure any ambiguity, to revise certain exhibits
and schedules, to correct or supplement any provision therein which may be
inconsistent with any other provision therein or to add other identifying code
numbers or identifying characteristics to the definition of Account or to add
any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. Additionally,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add to or change any of the provisions of the
Agreement to enable Bearer Certificates to be issued in conformity with the
Bearer Rules, to provide that Bearer Certificates may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
(or premium, if any) or any interest on Bearer Certificates to comply with the
Bearer Rules, to permit Bearer Certificates to be issued in exchange for
Registered Certificates (if then permitted by the Bearer Rules), to permit
Bearer Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Investor Certificates in
uncertificated form, provided any such action shall not adversely affect the
interest of the holders of Bearer Certificates of any Series or any related
Coupons in any material respect unless such amendment is necessary to comply
with the Bearer Rules.
The Agreement and any Supplement may also be amended from time to time by
the Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement,
or of modifying in any manner the rights of the Holders of Investor
Certificates; provided that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor
Certificateholders of any outstanding Series, (ii) such amendment shall not
cause the Trust to be characterized as a corporation for Federal income tax
purposes or otherwise have a material adverse effect on the Federal income
taxation of any Series and (iii) the Servicer shall have given each Rating
Agency ten (10) Business Days' prior written notice of such amendment and shall
have received written confirmation from each Rating Agency that the
A-1-6
<PAGE> 60
Rating Agency Condition will be met. No such amendment, however, may effect
any of the amendments that require unanimous Certificateholder consent
as set forth herein, in the Agreement or the Series Supplement or (i) reduce
in any manner the amount of, or delay the timing of, distributions which are
required to be made on any Investor Certificates of any Series, (ii) change
the definition of or the manner of calculating the interest of any
Certificateholder, (iii) alter the requirements for changing the percentage by
which the Minimum Transferor Amount is determined, or (iv) reduce the
percentage required by Section 13.1(b) of the Agreement to consent to such
amendment. Notwithstanding the foregoing, any amendment providing for the
transfer of Receivables to, and the generation of new Receivables by, the Bank,
the appointment of the Bank as Servicer, as a Seller, Transferor and/or
Eligible Originator, and/or the assignment of this Agreement, including any
Supplement to the Bank in connection with such transfer and any amendments
necessary to reflect such Bank and any related special purpose, bankruptcy
remote entity that is an Affiliate of Proffitt's, Inc. and that is organized
for the purpose of purchasing Accounts and Receivables from such Bank and
serving as Transferor will be deemed not to materially and adversely affect the
interests of the Certificateholders.
The Agreement and any Supplement may also be amended from time to time by
the Servicer, the Transferor and the Trustee with the consent of the Investor
Certificateholders evidencing Undivided Interests aggregating not more than 50%
of the Investor Amount of all Series adversely affected for the purpose of
adding any provisions to, changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of all holders
of the related Investor Certificates; (ii) change the definition of or the
manner of calculating the Investor Amount, the Investor Percentage, the
required amount under any Enhancement or the Investor Default Amount of such
Series without the consent of all holders of the related Investor Certificates
adversely affected thereby; or (iii) reduce the aforesaid percentage required
to consent to any such amendment, without the consent of all holders of the
related Investor Certificates of all Series adversely affected thereby. Any
amendment pursuant to this paragraph shall require prior written confirmation
from the applicable Rating Agency that the Rating Agency Condition will be met.
Subject to Section 13.1(c) of the Agreement, each Certificateholder by its
acceptance of this Certificate or any interest in this Certificate, consents to
any amendment to the Agreement or any Supplement necessary for the Transferor
to elect FASIT status for the Trust or any portion thereof under the Code.
The Class A Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class A
Certificate shall be registered in the Certificate Register upon surrender of
this Class A Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and
A-1-7
<PAGE> 61
Registrar, and thereupon one or more new Class A Certificates in authorized
denominations representing like aggregate undivided interests in the Trust will
be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class A Certificates are exchangeable for new Class A Certificates
in authorized denominations of like aggregate undivided interests in the Trust
as requested by the Class A Certificateholder surrendering such Class A
Certificates. No service charge may be imposed for any transfer or exchange
but the Transfer Agent and Registrar and the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar and any
agent or representative of any of them may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor
any agent or representative of any of them, shall be affected by notice to the
contrary.
THE AGREEMENT AND THIS CLASS A CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
A-1-8
<PAGE> 62
ASSIGNMENT
Social Security or other Taxpayer Identification number (T.I.N.) of assignee
____________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: *
---------------------
Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in every
particular, without alteration, enlargement or any change whatsoever.
A-1-9
<PAGE> 63
EXHIBIT A-2
TO THE
SERIES 1997-2 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
<PAGE> 64
EXHIBIT A-2
TO THE
SERIES 1997-2 SUPPLEMENT
FORM OF CLASS B CERTIFICATE
REGISTERED $__________
NO. B-1 CUSIP No. __________
Unless this Class B Certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the issuer or
its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1997-2
Class B Expected Payment Date:
________, 200__ Distribution Date
Each $1,000 minimum denomination represents a
_______ undivided interest
in certain assets of the
PROFFITT'S CREDIT CARD MASTER TRUST
Evidencing an undivided interest in a trust, the corpus of which consists
primarily of receivables generated from time to time in a portfolio of consumer
revolving credit card accounts of
PROFFITT'S CREDIT CORPORATION
(Not an interest in or obligation of Proffitt's Credit Corporation
or any Affiliate thereof)
<PAGE> 65
This certifies that Cede & Co.(the "Class B Certificateholder") is the
registered owner of a fractional undivided interest in certain assets of a
trust (the "Trust") created pursuant to the Master Pooling and Servicing
Agreement, dated as of ________, 1997, (as amended and supplemented, the
"Agreement"), as supplemented by the Series 1997-2 Supplement, dated as of July
__,1997 (as amended and supplemented, the "Series Supplement"), among
Proffitt's Credit Corporation, as Transferor, Proffitt's, Inc., as Servicer,
and Norwest Bank Minnesota, National Association, a national banking
association, as trustee (the "Trustee"). The corpus of the Trust consists of
(i) receivables (the "Receivables") generated from time to time in a portfolio
of consumer revolving credit card accounts identified under the Agreement (the
"Accounts"), (ii) all monies due or to become due in payment of the
Receivables, (iii) all proceeds of the Receivables and proceeds of Insurance
Policies relating to the Receivables, (iv) all monies held in certain bank
accounts of the Trust (excluding investment earnings, unless otherwise
specified in the Agreement or any Supplement), (v) all Recoveries and
Collections of the Receivables, (vi) any Enhancement with respect to any Series
(or class thereof) and (vii) all other assets and interests constituting the
Trust Property. Although a summary of certain provisions of the Agreement and
the Series Supplement is set forth below and on the Summary of Terms and
Conditions attached hereto and made a part hereof, this Class B Certificate
does not purport to summarize the Agreement and the Series Supplement and
reference is made to the Agreement and the Series Supplement for information
with respect to the interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and obligations of the Trustee.
A copy of the Agreement and the Series Supplement (without schedules) may be
requested from the Trustee by writing to the Trustee at Norwest Bank Minnesota,
N.A., Norwest Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0070,
Attention: Asset Backed Securities, Corporate Trust Department. To the extent
not defined herein, the capitalized terms used herein have the meanings
ascribed to them in the Agreement or the Series Supplement, as applicable.
This Class B Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement and the Series Supplement, to which
Agreement and Series Supplement, each as amended and supplemented from time to
time, the Class B Certificateholder by virtue of the acceptance hereof assents
and is bound.
It is the intent of the Transferor and the Investor Certificateholders
(and Certificate Owners) that, for Federal, state and local income and
franchise tax purposes only, the Investor Certificates will qualify as
indebtedness of the Transferor secured by the Receivables (unless otherwise
specified in the related Supplement). The Class B Certificateholder (and each
Certificate Owner of a Class B Certificate), by the acceptance of this Class B
Certificate (or its interest therein), is deemed to agree to treat this Class B
Certificate for Federal, state and local income and franchise tax purposes and
any other tax imposed on or measured by income as indebtedness of the
Transferor.
<PAGE> 66
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Class B Certificate shall not
be entitled to any benefit under the Agreement or the Series Supplement or be
valid for any purpose.
IN WITNESS WHEREOF, the Transferor has caused this Class B Certificate to
be duly executed by its undersigned officer thereunto duly authorized.
PROFFITT'S CREDIT CORPORATION
By:
-----------------------
Name:
Title:
Dated: , 1997
--------------------
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates described in the within-mentioned
Agreement and Series Supplement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
------------------------
Authorized Officer
Dated: , 1997
----------------------
<PAGE> 67
PROFFITT'S CREDIT CARD MASTER TRUST
CLASS B ASSET BACKED CERTIFICATE, SERIES 1997-2
SUMMARY OF TERMS AND CONDITIONS
This Class B Certificate is one of a Series of Certificates entitled
"Proffitt's Credit Card Master Trust, Series 1997-2 Certificates" (the "Series
1997-2 Certificates"), and one of a class thereof entitled "Class B Asset
Backed Certificates, Series 1997-2" (the "Class B Certificates"), each of which
represents a fractional undivided interest in certain assets of the Trust. The
Trust Property is allocated in part to the Investor Certificateholders of all
outstanding Series (the "Certificateholders' Interest") and the interests, if
any, of any Enhancement Providers, with the remainder allocated to the
Transferor. The aggregate interest represented by the Class B Certificates at
any time in the Principal Receivables in the Trust shall not exceed an amount
equal to the Class B Investor Amount at such time. The Class B Initial
Investor Amount is $________. The Class B Investor Amount on any date will be
an amount equal to (a) the Class B Initial Investor Amount, minus (b) the
aggregate amount of principal payments made to the Class B Certificateholders
prior to such date, minus (c) the aggregate amount of Class B Investor Charge
Offs for all prior Distribution Dates, minus (d) the amount of Class B
Subordinated Principal Collections allocated to certain shortfalls in respect
of the Class A Certificates on all prior Distribution Dates pursuant to the
Series Supplement (excluding any Class B Subordinated Principal Collections
that have resulted in a reduction in the Collateral Indebtedness Amount or the
Class D Investor Amount pursuant to the Series Supplement), minus (e) an amount
equal to the amount by which the Class B Investor Amount has been reduced on
all prior Distribution Dates to avoid certain reductions in respect of the
Class A Certificates, plus (f) the sum of the amount of Excess Spread and
Shared Excess Finance Charge Collections allocated and available on all prior
Distribution Dates pursuant to the Series Supplement for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and (e)
and, without duplication, the aggregate amount of the reductions of the Series
Adjustment Amounts allocable to the Class B Investor Amount pursuant to the
Series Supplement prior to such date; provided, however, that the Class B
Investor Amount may not be reduced below zero. The "Class B Adjusted Investor
Amount" shall mean, on any date of determination, an amount equal to the Class
B Investor Amount minus, prior to the payment in full of the Class A Investor
Amount, the excess of the Principal Account Balance over the Class A Investor
Amount, and after the payment in full of the Class A Investor Amount, the
Principal Account Balance, if any (but not less than zero). In addition,
classes of the Series 1997-2 Certificates entitled "Class A Asset Backed
Certificates, Series 1997-2" (the "Class A Certificates"), "Collateral
Indebtedness Interest, Series 1997-2" (the "Collateral Indebtedness Interest")
and "Class D Asset Backed Certificates, Series 1997-2" (the "Class D
Certificates") will be issued. The Exchangeable Transferor Certificate has
been issued to Proffitt's Credit Corporation pursuant to the Agreement, which
represents the Transferor Interest.
<PAGE> 68
Subject to the terms and conditions of the Agreement, the Transferor may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of Investor Certificates, and/or Additional Class D
Certificates, which will represent fractional undivided interests in certain
Trust Property.
Each Class B Certificate represents the right to receive payments of (i)
interest at the rate of _____% per annum accruing from _____________, payable
on ______________ and on the 15th day of each month thereafter (or, if such
15th day is not a Business Day, the next succeeding Business Day) (each, a
"Distribution Date") and (ii) principal on the ________ Distribution Date (and
each Distribution Date thereafter, if the Class B Certificates are not paid in
full on the __________ Distribution Date) or, upon the occurrence of a Pay Out
Event, on each Distribution Date relating to the Rapid Amortization Period,
provided that no principal payments will be made on the Class B Certificates
until the Class A Certificates have been paid in full, in each case funded from
a percentage of the payments received with respect to the Receivables and
certain other funds, all as more fully described in the Agreement and the
Series Supplement. Interest on the Class B Certificates will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
THE CLASS B CERTIFICATES ARE SUBORDINATED TO THE CLASS A CERTIFICATES TO
THE EXTENT SET FORTH IN THE SERIES SUPPLEMENT. THE COLLATERAL INDEBTEDNESS
INTEREST AND THE CLASS D CERTIFICATES ARE SUBORDINATED TO THE CLASS A
CERTIFICATES AND THE CLASS B CERTIFICATES TO THE EXTENT SET FORTH IN THE
AGREEMENT.
On each Distribution Date, the Paying Agent shall distribute to each Class
B Certificateholder of record on the last Business Day of the immediately
preceding calendar month (each a "Record Date") such Class B
Certificateholder's pro rata share of such amounts (including, after the Class
A Certificates have been paid in full, amounts held in the Principal Account)
as are payable to the Class B Certificateholders pursuant to the Agreement and
the Series Supplement. Distributions with respect to this Class B Certificate
will be made by the Paying Agent by check mailed to the address of the Class B
Certificateholder of record appearing in the Certificate Register without the
presentation or surrender of this Class B Certificate or the making of any
notation thereon (except for the final distribution in respect of this Class B
Certificate), except that with respect to Class B Certificates registered in
the name of Cede & Co., as nominee for The Depository Trust Company,
distributions will be made in the form of immediately available funds. Final
payment of this Class B Certificate will be made only upon presentation and
surrender of this Class B Certificate at the office or agency specified in the
notice of final distribution delivered by the Trustee in accordance with the
Agreement and the Series Supplement.
On any Distribution Date occurring on or after the day on which the sum of
the Class A Adjusted Investor Amount, the Class B Adjusted Investor Amount, the
Collateral Indebtedness Amount and the amount of the Class D Investor Amount
held by
<PAGE> 69
parties other than the Transferor or any of its affiliates is less than or
equal to 10% of the sum of the Class A Investor Amount on the Closing Date, the
Class B Investor Amount on the Closing Date, the Collateral Indebtedness Amount
on the Closing Date and the highest amount of the Class D Investor Amount held
by parties other than the Transferor or any of its affiliates since the Closing
Date, the Class B Certificates are subject to optional repurchase by the
Transferor, if certain conditions set forth in the Agreement or the Series
Supplement are satisfied. The purchase price will be equal to the Class B
Adjusted Investor Amount plus accrued but unpaid interest thereon.
Subject to certain conditions in the Agreement, if the Investor Amount is
greater than zero on the ______________ Distribution Date (the "Stated Series
Termination Date"), the Trustee shall sell or cause to be sold an amount of
Receivables up to 110% of the Adjusted Investor Amount at the close of business
on such date, but not more than the total amount of Receivables allocable to
the Series 1997-2 Certificates, and apply the proceeds of such sale as provided
in the Agreement and the Series Supplement.
This Class B Certificate does not represent a recourse obligation of, or
an interest in, the Transferor, the Servicer, or any Affiliate of any of them
and is not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other governmental agency or instrumentality. This Class B Certificate
is limited in right of payment to certain Collections with respect to the
Receivables (and certain other amounts), all as more specifically set forth
hereinabove and in the Agreement and the Series Supplement.
The Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to cure any ambiguity, to revise certain exhibits
and schedules, to correct or supplement any provisions therein which may be
inconsistent with any other provisions therein or to add other identifying code
numbers or identifying characteristics to the definition of Account or to add
any other provisions with respect to matters or questions raised under the
Agreement which shall not be inconsistent with the provisions of the Agreement;
provided, however, that such action shall not adversely affect in any material
respect the interests of any of the Investor Certificateholders. Additionally,
the Agreement and any Supplement may be amended from time to time by the
Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, to add to or change any of the provisions of the
Agreement to enable Bearer Certificates to be issued in conformity with the
Bearer Rules, to provide that Bearer Certificates may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
(or premium, if any) or any interest on Bearer Certificates to comply with the
Bearer Rules, to permit Bearer Certificates to be issued in exchange for
Registered Certificates (if then permitted by the Bearer Rules), to permit
Bearer Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Investor Certificates in
uncertificated form, provided any such action shall not adversely affect the
interest of the holders of Bearer
<PAGE> 70
Certificates of any Series or any related Coupons in any material respect
unless such amendment is necessary to comply with the Bearer Rules.
The Agreement and any Supplement may also be amended from time to time by
the Servicer, the Transferor and the Trustee, without the consent of any of the
Investor Certificateholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement,
or of modifying in any manner the rights of the Holders of Investor
Certificates; provided that (i) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that such amendment will not
materially and adversely affect the interests of the Investor
Certificateholders of any outstanding Series, (ii) such amendment shall not,
as evidenced by an Opinion of Counsel, cause the Trust to be characterized as a
corporation for Federal income tax purposes or otherwise have a material
adverse effect on the Federal income taxation of any Series and (iii) the
Servicer shall have given each Rating Agency ten (10) Business Days' prior
written notice of such amendment and shall have received written confirmation
from each Rating Agency that the Rating Agency Condition will be met. No such
amendment, however, may effect any of the amendments that require unanimous
Certificateholder consent as set forth herein in the Agreement or the Series
Supplement or (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required by Section 13.1(b) of the Agreement to be made
on any Investor Certificates of any Series, (ii) change the definition of or
the manner of calculating the interest of any Certificateholder, (iii) alter
the requirements for changing the percentage by which the Minimum Transferor
Amount is determined, or (iv) reduce the percentage required for consents to
amendments pursuant to the following paragraph. Notwithstanding the foregoing,
any amendment providing for the transfer of Receivables to, and the generation
of new Receivables by, the Bank, the appointment of the Bank as Servicer, as a
Seller, Transferor, and/or Eligible Originator, and/or the assignment of this
Agreement, including any Supplement, to the Bank in connection with such
transfer and any amendments necessary to reflect Bank and any related special
purpose, bankruptcy remote entity that is an Affiliate of Proffitt's, Inc. and
that is organized for the purpose of purchasing Accounts and Receivables from
such Bank and serving as Transferor will be deemed not to materially and
adversely affect the interests of the Certificateholders.
The Agreement and any Supplement may also be amended from time to time by
the Servicer, the Transferor and the Trustee with the consent of the Investor
Certificateholders evidencing Undivided Interests aggregating not more than
50% of the Investor Amount of all Series adversely affected, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of all holders
of the related Investor Certificates; (ii) change the definition of or the
manner of calculating the Investor Amount, the Investor Percentage, the
required amount under any Enhancement or the Investor Default Amount of such
Series without the consent of all
<PAGE> 71
holders of the related Investor Certificates adversely affected thereby; or
(iii) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of all holders of the related Investor
Certificates of all Series adversely affected thereby. Any amendment pursuant
to this paragraph shall require prior written confirmation from the applicable
Rating Agency that the Rating Agency Conditions will be met.
Subject to Section 13.1(c) of the Agreement, each Certificateholder, by
its acceptance of this Certificate or any interest in this Certificate,
consents to any amendment to this Agreement or any Supplement necessary for the
Transferor to elect FASIT status for the Trust or any portion thereof under the
Code.
The Class B Certificates are issuable only in minimum denominations of
$1,000 and integral multiples of $1,000. The transfer of this Class B
Certificate shall be registered in the Certificate Register upon surrender of
this Class B Certificate for registration of transfer at any office or agency
maintained by the Transfer Agent and Registrar, and thereupon one or more new
Class B Certificates in authorized denominations representing like aggregate
undivided interests in the Trust will be issued to the designated transferee or
transferees.
As provided in the Agreement and subject to certain limitations therein
set forth, Class B Certificates are exchangeable for new Class B Certificates
in authorized denominations of like aggregate undivided interests in the Trust
as requested by the Class B Certificateholder surrendering such Class B
Certificates. No service charge may be imposed for any transfer or exchange
but the Transfer Agent and Registrar and the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
The Trustee, the Paying Agent and the Transfer Agent and Registrar and any
agent or representative of any of them may treat the person in whose name this
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Paying Agent, the Transfer Agent and Registrar, nor
any agent or representative of any of them, shall be affected by notice to the
contrary.
THE AGREEMENT AND THIS CLASS B CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS.
<PAGE> 72
ASSIGNMENT
Social Security or other Taxpayer Identification Number (T.I.N.) of assignee
_________________
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(name and address of assignee)
the within Certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
Certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:
*
- ------- ---------------------
Signature Guaranteed:
(*) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate in
every particular, without alteration, enlargement or any change whatsoever.
